Tackling Money Laundering Malpractice in the Estate Industry

Money Laundering Malpractice in the Estate Industry
Legally reviewed by: Laura Smith Updated: Corporate & Financial Crime

£1 Billion Lost to Financial Malpractice

Recent studies suggest that the UK is losing up to £100 billion annually due to financial malpractice. A significant portion of this figure is attributable to companies failing to carry out comprehensive anti-money laundering (AML) measures.

A recent report from tech firm, SmartSearch, highlights an alarming trend of companies neglecting thorough checks on crucial hard-copy documents such as passports and utility bills, which are easily susceptible to forgery.

Furthermore, the report reveals that over three quarters of property firms have not changed how they take on new customers since the invasion of Ukraine. This potentially allows individuals associated with sanctioned entities to covertly invest in real estate. Nearly half of all regulated firms, especially finance firms, are failing to check transactions for the presence of “ghost” companies. These are fake companies used by criminals to disguise who is involved in the transaction.

Rise of Money Laundering Malpractice in the Real Estate Industry

Gaps in document checks are resulting in the growth of money laundering, a process where criminals conceal the origins of their illegal funds. Many criminals using the real estate market for money laundering due to the lack of document checking particularly prominent in this industry.  

All companies that operate in the property sectors, (as well as all other regulated industries) must adhere to strict obligations outlined in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The regulations dictate how a business should engage in estate agency activities to register with HM Revenue and Customs and conduct due diligence on customers to verify their identities. Additionally, businesses must carry out comprehensive risk assessments. This involves carrying out internal controls that are adapted to the scale of the business’s operations.

Reporting Money Laundering Malpractice

All regulated entities must report any suspicious money laundering activity through Suspicious Activity Reports (SARs) to the National Crime Agency (NCA). However, the high number of malpractices within the estate industry spreads cause for concern, with many businesses failing to report SARs.

Real estate businesses are often targets for money laundering due to the commonplace of substantial financial transactions. By not complying with the AML regulations, the real estate industry exposes agents to severe legal repercussions. This can include large fines or even imprisonment. The reputational damage caused by the fallout of a money laundering scandal could prove catastrophic for any estate agency.

Keeping Your Business Legally Compliant

To reduce these risks, estate agents must prioritise legal compliance and seek guidance regarding any obligations they are unsure of. To keep a business compliant, you need robust legal framework, involving continuous risk assessments, the implementation of appropriate measures, and regular reviews to ensure the effectiveness of your current framework.

It’s vital not to neglect these measures. Doing so not only increases your vulnerability to money laundering but also undermines the ability to challenge allegations or form a solid defence during investigations. Therefore, just like how prospective buyers conduct due diligence, estate agents must also ensure strict compliance measures. Doing so helps to safeguard against the growing threat of money laundering.  

Corporate and Financial Crime Solicitors

At Cartwright King, we are dedicated to providing exemplary corporate and financial crime servicesOur team are here to assist businesses and individuals in navigating these new regulations effectively. Our expertise and commitment to upholding the highest legal standards ensure that you are well-equipped to meet your legal obligations and protect your interests.

Please reach out to our team for legal support and any insights you may require.

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Legal Disclaimer.

All advice is correct at time of publication.