The property sector has long been targeted by organised criminals to launder their ‘dirty’ money.
In fact, Transparency International UK has estimated that up to £6.7 billion of suspicious funds has been invested in UK properties during the last six years.
When we surveyed property firms as part of a wider survey of 500 regulated businesses in May, almost one in five (18%) said they had seen a rise in criminals attempting to launder money or commit financial crime through their businesses in the last 12 months.
And more than one in 16 (6%) said they had been the victim of money laundering or financial crime in the past six months.
Make no mistake estate agents are in the trenches on the front line in the war against money laundering.”
And the pressure on firms to keep pace with ever-changing anti-money laundering (AML) rules and procedures has never been more onerous.
That is probably why property firms made up almost half of 79 firms named and fined by HMRC for breaches of the regulations between April and December last year. They included estate agents, commercial property firms, valuers and auction houses.
Vladimir Putin’s invasion of Ukraine has made that exposure even more challenging.
The international community moved quickly to limit Russia’s ability to do business when the invasion took place. Within weeks, the existing 2,700 sanctions against Putin and Russia had been doubled. Now an unprecedented 7,200 individuals and 1,250 entities have been added to the sanctions list since Russia invaded Ukraine.
While it is vital that estate agents have robust ‘know your customer’ (KYC) procedures in place when it comes to onboarding new clients, this renewed focus on sanctions means they must also not overlook the importance of monitoring their existing clients.
Unfortunately, an astonishing 77% of the property firms who responded to our survey admitted they had either not changed the way they continued to monitor existing clients or had even reduced checks on them.
This is a long way from the due diligence needed to avoid the fines and reputational damage which come from a sanctions breach. And breaching the rules inadvertently is not a defence.
More and more agents are turning to technology to make their AML and sanctions compliance procedures easier and more robust.
The agents who make the switch to electronic verification (EV) quickly discover it is the most effective way for them to minimise their risk of breaching AML and sanctions regulations – in fact, the Money Laundering and Terrorist Finance Act 2020 recommends that regulated firms use EV as part of their due diligence to make it as effective as possible.
From verifying the identity of on-boarding clients to sanction list checking and monitoring, even retrospectively, EV is the best way for estate agents to conduct their due diligence.
It also vastly improves their own customer journeys – not only allowing them to onboard clients more quickly but also to stand out in what is a competitive marketplace.
Martin Cheek is Managing Director of SmartSearch.
Go to Publisher: Proptech Archives – The Negotiator
Author: Robyn Hall