AML tech platform shares risk levels of each part of the transaction process
A study by Credas Technologies, an anti-money laundering technology platform, has found that almost half of property professionals carry out their own AML checks.
This can be a tall order at the best of times, let alone in the middle of a property market boom, Credas said.
What’s more concerning is that it was also found that more than a quarter of property professionals (27%) believe that their own anti-money laundering compliance procedures wouldn’t stand up to scrutiny.
Read more: More than a quarter of property professionals think they aren’t AML compliant.
When it comes to money laundering within the property sector, Credas said there are three general types of risk to consider: customer risk, which is focussed on the buyer or seller themselves; transactional risk, focused on the property and the finance of a transaction; and geographical risk, which is not just about the nationality of a buyer, but whether or not their location matches that of the property they are purchasing.
To help property professionals detect potential money laundering threats, the software company has shared at what point of the property transaction process they should be at high alert.
Initial preparation - low to medium risk
The initial preparation stage can require some action, but the threat of money laundering can be fairly easy to detect. Many buyers will look to secure a mortgage in principle, and this requires a raft of personal information such as name, address, date of birth, income, expenditure, and existing credit agreements.
Mortgage lenders should check proof of funds and so any red flags around complex loans should come to the forefront at this point. Cash buyers should also raise an initial flag at this stage, but, just because these initial checks have been done, it doesn’t mean estate agents can rest easily. They are responsible for carrying out their own AML checks and must ensure these are done properly, regardless of how stringent the checks already made by mortgage lenders have been.
“While the threat of money laundering is fairly low during the initial stages of the transaction process, being able to fully qualify a buyer in terms of both their identity and their financial suitability can set the tone for a fully compliant property sale,” Tim Barnett, chief executive at Credas Technologies, said.
Property search and making an offer - medium to high risk
It’s at this stage that estate agents, in particular, need to be at the top of their AML game. ID checks are essential when registering a buyer’s interest and this is when the probability of any customer, transaction, or geographical risks must be considered.
Can the buyer be verified? Are they offering way over or under the asking price of the property? Are there any other mismatches between the buyer and property? Is this one of multiple successive transactions they’ve made recently? Are they purchasing within the UK from a nation with weak AML regimes?
This is when AML procedures will be tested and any customer, transaction, or geographical red flags should be reported immediately, especially if it is related to a new-build purchase as they carry a far higher risk.
Working towards completion - medium to high risk
Just because an offer has been accepted, conveyancing solicitors should not assume a buyer is AML compliant and the threat remains at its highest when working towards completion.
They too, should carry out their own due diligence to investigate proof of ID, funds, and the source of said funds. The red flags associated with customer, transaction, and geographical risk are still relevant at this stage and so anything they think may have been missed by a mortgage lender or estate agent should still be reported.
Exchange and completion
By the time a transaction completes, any buyer should have been subjected to multiple checks by mortgage lenders, estate agents, and solicitors. They should be happy that the buyer is who they claim to be, their source of funds is proven and legitimate, and they are able to pay both the seller and other costs associated such as stamp duty.
“It also helps those at the sharper end of the process to rest easier, knowing these checks have been executed properly and the buyer they are dealing with is legitimate,” Barnett said.
“Of course, this isn’t always the case and many stakeholders within the home buying process will execute their own AML checks to varying standards of success. This means that those further down the line must remain diligent to the threat of money laundering at all times, but particularly when an offer is being made and progressed to completion,” he stressed.
