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Paper-based processes making resi property “easy target” for money launderers

Jessica Nangle

November 2, 2020

Paper-based processes are making residential property an easy target for money launderers according to Joe Pepper, chief executive of tmgroup.

In a recent tm:tv session, Pepper explored the subject with key industry figures from businesses such as Just Mortgages and NAEA Propertymark and discussed how issues surrounding inconsistency, lack of regulation and reliance on paper-based processes need to be addressed to help the industry move forward.

Money laundering continues to be a huge challenge, with £4.5bn of “dirty money” estimated to have gone through the residential property last year, and some believing the actual figure is closer to £30bn. 

Simon Wilkinson, owner of the Wilkinson Partnership and board member of NAEA Propertymark, said: “Beyond the introduction of the 5th and 6th AML Directives, heavy fines and high profile cases have come into play.

“HMRC have also been doing more audits over the last few years, so property professionals are taking AML practices far more seriously.

“Unfortunately, we’re still seeing a handful of ‘rogue’ agents not following proper practices and leaving themselves open to sanctions, which will be a question of when they get prosecuted – not if.”

Residential property is becoming increasingly attractive to money launderers as it enables a quick and easy way to “clean” hundreds of thousands of pounds in a single transaction.

Coupled with many law firms, estate agents, and mortgage brokers still using older, manual methods to complete AML due diligence, tmgroup say this provides huge motivation for criminals to develop new and increasingly sophisticated methods.

Members of the tm:tv discussion agreed that industry needs to reflect on how it is practicing AML due diligence.

Simon Wilkinson continues: “Part of the problem is the lack of regulation across the industry resulting in poor practices being rife.

“This is evident in the latest research from the SLC and SRA as, at the end of last year, a series of random surveys from the SLC found that two-thirds of firms were non-compliant with their AML rules, whilst the SRA found that 65% were just using a boilerplate template for their AML due diligence.”

Technology providers have been working on solutions which are now available that use Artificial Intelligence and facial recognition technology to verify identity documents and source of funds to save time and reduce risk.

As consumers become increasingly tech-savvy, it’s equally important that the industry moves away from the manual time-consuming processes and duplication of effort currently being seen, according to the discussion.

The industry also needs to consider practical solutions as to how multiple providers can all work together to deliver a joined up, time-saving and secure solution to everyone involved.

Individual providers also need to consider how they communicate and collaborate with industry partners to enable this according to Joe Pepper from the tmgroup.

Pepper concluded: “Collaboration across the industry is key to success and building solutions with open APIs will help to facilitate this, so we are increasingly able to join solutions together to not only make things better for property professionals and consumers, but make it harder for criminals to succeed.”

Tmgroup’s tm:tv hosts a range of online interviews, discussions and webinars relating to the property industry.


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