This informal CPD article on Anti-Money Laundering was provided by Jerry Walters – Managing Director of FCS Compliance, a professional anti money laundering compliance company offering due diligence and training services to corporate bodies as well as private individuals.
Anti-Money Laundering – ensuring a business is compliant and the common mistakes made
Money laundering in the UK has become big business, a fact not lost on government. Underpinning organised crime, it is estimated that the scale of money laundering impacting the UK each year, runs into hundreds of billions of pounds.
It’s not surprising that the government has stepped in. John Glen, Economic Secretary to the Treasury stated that “money laundering regulation exists to help protect honest business” and warned that “anyone who flaunts the law should know that swift action will be taken”.
Estate agents and those involved with property transactions, including conveyancers, have been identified as a weak link in the UK’s anti-money laundering (AML) defenses. Criminals are increasingly turning to property – both residential and commercial – as a means to make dirty money clean. This has not gone unnoticed by HMRC who have stepped up the number of spot checks they have been carrying out on agents working across the country, and agents have been quick to respond, taking measures to ensure that they are anti-money laundering compliant. But thinking you are compliant and being compliant can be two quite different things and many agents – and conveyancers – are unwittingly falling short of what is required of them. However, for HMRC this is no defence.
Back to Basics
Going back to basics, there are essentially two documents that all property professionals (i.e. anyone who is involved with the sale of a property) must have in their office, read, understand and adhere to. The first is AML Policies and Procedures (in line with Regulation 19) and the second, Risk Assessment (in line with Regulation 18).
Starting with The AML Policies and Procedures manual. This covers the different levels of Customer Due Diligence (CDD) that are expected and when each is applicable. It also outlines the process for making a Suspicious Activity Report (SAR), an explanation of how to identify and deal with a Politically Exposed Person (PEP) and the main offences under the Proceeds of Crime Act 2002 which include ‘Failing to Disclose’ and ‘Tipping Off’.
Risk Assessment
Risk Assessment in line with Regulation 18, is (unsurprisingly!) concerned with risk assessment – a central part of the money laundering legislation. Many businesses have yet to undertake any kind of AML firm-wide risk assessment and those that have, frequently confuse this with the risk rating of an individual client. In our experience – and rather worryingly – we have yet to see an AML risk assessment that would be considered acceptable or even meet the regulation criteria.
CDD is another area that frequently causes confusion. Common failings include a lack of a Land Registry search, identification documents not certified correctly, out of date or inadequate proof of address and/or failure to undertake a PEP/financial sanctions check. There are misunderstandings too around what’s meant by placing “Reliance” (in line with Regulation 39) on CDD undertaken by another agent or solicitor. Agents need to do more than merely rely on another person’s word; in short they must obtain and identify the ultimate beneficial owner of a property even when this is difficult to do, such as when the client is an offshore trust or company.
Training is important
And finally training – a key component of the legislation. All too often staff have received either no or very little AML training. Training is important – which is why it’s included in the legislation. Property professionals need to know and understand the extent to which the real estate market has been, and still is being is used by criminals to launder significant sums of illegally obtained wealth.
All too often regulations become a tick-box exercise and the crimes associated with them, too distant to be real. But for the victims of crimes enabled by laundered money, the impact – personal or commercial – can be devastating.
Stay compliant
Staying compliant is important for everyone; its contribution to stamping out crime should not be under estimated.
We hope this article was helpful. For more information from FCS Compliance, please visit their CPD Member Directory page. Alternatively please visit the CPD Industry Hubs for more CPD articles, courses and events relevant to your Continuing Professional Development requirements.
