Outside of the moral obligations for preventing money laundering, brokers need to ensure they are doing their due diligence to avoid getting blacklisted by lenders.
John Dobson (pictured) is CEO of SmartSearch
The rental market in the UK is booming with demand for properties to let is hitting new highs. Alongside the record-breaking housing market, there is a huge desire to move from renters as well. Cities are making a comeback, as the UK slowly begins to exit from lockdown restrictions, with Zoopla’s recent Rental Market Report finding demand is increasing in wider commuter zones and well-connected towns.
However, alongside the increasing number of legitimate landlords, brokers need to be aware of the possibility of criminals looking to the buy-to-let market to ‘wash’ illicitly-gotten gains.
While the pandemic has spurred action in the housing market, it also has presented opportunities for fraud and money laundering. As we predicted way back in March 2020, cases of fraud and attempted fraud have sky-rocketed during the pandemic, with criminals seizing on the lack of face-to-face contact as an opportunity to profit.
Buy-to-let a prime target for money-laundering
The rental market in the UK is great for laundering money. Not only does the criminal get to ‘clean’ their money through the initial purchase of the property, but they can then continue to make money each month through rental income. Then in a few years, sell the property – most likely for a tidy profit – and there you have it, legitimate funds.
Brokers need to be vigilant to this threat, as the Financial Conduct Authority (FCA) is looking to crack down on those who facilitate money laundering. The FCA warned that it is “actively monitoring” the property market for fraud and money-laundering and had increased surveillance over the past 12 months Therefore, those that are lax in their approach may leave themselves exposed to hefty fines.
Verify your client
To prevent fines, and reputational damage, brokers should look to accurately verify who their client is, and then ensure they are not on any sanctions of Politically Exposed Persons (PEP) lists. This can be an arduous task. Requesting a passport photo and accompanying selfie. Checking these match. Ensuring the passport is legitimate. Scanning the hundreds of sanctions lists across the world. Doing this manually can be an incredible drain on time.
The easiest way for brokers to ensure they are compliant is to use an electronic verification system such as SmartSearch. With just a name, date of birth and address, the system will check credit data from the three largest providers in the UK, and also scour the sanctions and PEPs lists to ensure the client is not wanted in Peru for drug trafficking. This all takes place in just two seconds. The credit data is virtually impossible to fake and will give the broker peace of mind that the client is a legitimate buyer.
Outside of the moral obligations for preventing money laundering, brokers need to ensure they are doing their due diligence to avoid getting blacklisted by lenders. If a broker passes on a few fraudulent cases, then a lender may decide that the intermediary is not to be trusted and completely shut themselves off from them.
With demand for rental properties set to continue, buy-to-let brokers will be rushed off their feet in the coming months. What they can’t rush, is their anti-money laundering checks, and the best way for them to comply is to use an electronic verification system like SmartSearch.
