Over the past decade, the UK’s reputation in the property market has increasingly become associated with the risk of money laundering. In 2016 the Home Affairs Select Committee found that the country’s property market, particularly in London, was the highest contributor to laundering £100bn of illicit funds in the UK. Despite this, only 335 out of some 1.2 million property transactions in the UK were deemed suspicious.
As well as the societal impact money laundering has, it also increases risk for conveyancers, solicitors and estate agent businesses (EABs), which can be liable for not complying with Anti Money Laundering (AML) guidelines and so must be vigilant when carrying out financial checks as part of property transactions. As of recent months, HMRC and the FCA have made the AML guidelines stricter, enforcing sanctions and suspensions of legal managers as well as large financial penalties and cancellation of registrations for businesses that do not comply.
The attraction of property in the UK’s highest priced cities – such as London and Edinburgh – is simple: property prices have steadily increased in the UK, offering a low risk, high return asset for criminals looking to conceal illicit funds.
Legal professionals need to carry out strict checks and source of funds reports, particularly where money laundering is a greater risk. However, due diligence can fall short.
A December 2020 HM Treasury and Home Office report outlined common failings include a lack of appropriate risk assessment procedures and lack of consideration as to how location affects the risk level – many fail to recognise that higher priced properties are at a greater risk of being purchased with dirty money.
Rather than spending hours collecting, verifying, and analysing bank statement information, legal firms can now use financial technology to help save time and provide more accurate methods of checking financial data.
Our platform allows financial professionals to compile and verify a client’s bank account information and create detailed source of funds and proof of funds reports quickly and reliably. It eliminates the need to manually verify a client’s funds as well as ownership of accounts. A client check can also be conducted across multiple bank accounts, providing the required information from those accounts in a single report. Using Armalytix, this information can be requested, authorised and sent in moments, providing legal professionals with 12 months or more of accurate bank statement data.
The reports also highlight regular incomings and outgoings, provide a timeline of account balances, and flag any significant payments so irregular activity can be identified for further inspection.
Ultimately, this means legal professionals can better conduct the necessary AML checks and spend less time on lengthy tasks such as data collection and verification – turning their focus to the reasons behind financial behaviour rather than financial data itself. This is especially useful for legal firms based in areas of the country with high property prices, which must take extra care when processing property funds.
Where money is at a greater risk of being laundered, firms are at a greater risk of missing the signs, making the requirement for stricter AML checks more important. Our technology is in place to help with those checks, making the process more effective while also making the day to day lives of legal professionals easier.