Anti-Money Laundering

Introduction

Money laundering is how criminals change money and other assets into clean money or assets that have no obvious link to their criminal origins.

Money laundering can take many forms, but in the property sector it often involves:

  • buying a property asset using the proceeds of crime and selling it on, giving the criminal an apparently legitimate source of funds
  • criminals may also hide behind complex company structures and multiple accounts to disguise the real purpose of a transaction and hide its beneficial ownership
  • a more direct method may involve paying an estate agent or auctioneer a big deposit and reclaiming it later
  • the money for a purchase may be the result of mortgage fraud

Tax evasion is a criminal offence that can lead to money laundering. For example, the sale price of a property may be set below the Stamp Duty threshold by manipulating the price of furniture and fittings. In a commercial setting, there may be underreporting of business turnover.

 

Terrorist financing

Terrorist financing involves dealing with money or property that you’ve reasonable cause to suspect may be used for terrorism. The funds and property may be from legitimate sources or criminal sources. They may be in small amounts.

 

Legislation

The main UK legislation covering anti-money laundering and counter-financing of terrorism is always involving but at the time of preparation of this Policy the main Acts are:

  • Proceeds of Crime Act 2002
  • Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
  • Terrorism Act 2000
  • Anti-Terrorism, Crime and Security Act 2001
  • Terrorism Act 2006

The Proceeds of Crime Act sets out the primary offences related to money laundering:

  • concealing, disguising, converting, transferring or removing criminal property from the UK
  • entering into or becoming involved in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person
  • the acquisition, use and/or possession of criminal property

The main money laundering offences apply to everyone, and you commit an offence if you know or suspect that the property is criminal property.

Under the Proceeds of Crime Act it’s also an offence to fail to report suspicious activity and tipping off any person that you’ve made such a report. This applies to businesses in the regulated sector, such as estate agents.

The Terrorism Act sets out the primary offences relating to terrorist funding. Regulated businesses, like estate agents, must report belief or suspicion of offences related to terrorist financing, such as:

  • fundraising for the purposes of terrorism
  • using or possessing money for the purposes of terrorism
  • involvement in funding arrangements
  • money laundering - facilitating the retention or control of money that’s destined for, or is the proceeds of, terrorism

 

Registration

Estate Agency Businesses must comply with the regulations. They must not carry on business as an estate agent unless they register with HM Revenue and Customs (HMRC).

RPC Land & New Homes is registered under this legislation.

 

Penalties

If a person fails to comply with the regulations, they may face a civil or criminal prosecution. This could result in unlimited fines and/or a prison term of up to two years, or civil financial penalties.

 

Know Your Client

An estate agency business is considered to enter into a business relationship with both parties to the transactions, i.e. the prospective property seller and the prospective property buyer. The person who is not a customer, in the commercial sense, must be treated in the same way as a customer for the purposes of the Regulations, for example, the same obligations to apply an appropriate level of customer due diligence.

The checks below are required to satisfy the legislation. These presume that we have met the clients and can therefore confirm their visual identity and address. They are:

  • Full Name
  • Residential Address
  • Date of Birth
  • Verification documents - Valid Passport/Valid Photo card Driving Licence/National Identity
  • Card/Firearms Certificate/Identity Card issued by the Electoral Officer for Northern Ireland

Plus

  • Utility Bill/Bank/Building Society or Credit Union Statement/Recent Mortgage Statement from a recognised lender/ Council Tax Bill.

If the property is held in more than one name then the verification checks must be carried out for each individual.

However, it is more likely that RPC will be instructed by a company and therefore the following information will need to sought and verified.

  • Company Registration Number
  • Registered Address
  • Company’s Certificate of Incorporation
  • Country of Incorporation
  • Confirmation that the instructing person has the authority to act on behalf of the company
  • For private or unlisted companies an estate agent must obtain the names of all directors and the names of individuals who own or control over 25% of its shares or voting rights.

For land sales it may be advisable for a Land Registry search to be undertaken to confirm ownership and kept on file.

 

SmartSearch

RPC Land & New Homes has entered into a service provides by SmartSearch, Mayfield House, Lower Railway Rd, Ilkley, LS29 8FL Company No 05534508. VAT No 338 4622 89. ICO no. Z1108931

This service provides real time Individual or Business Anti Money Laundering (AML) verification checks both for International and UK searches. It also provides Sanction & PEP checking.

All Developer client due diligence and House Purchaser due diligence for reservations taken by office based staff will be undertaken using SmartSearch.

House purchaser reservations taken on site by Site Sales staff will require the collection, copying and filing of two forms of identification for all parties on the reservation form.

 

Concerns or Suspicious Activity

If there is a reluctance to provide identifying documents or there are any concerns with the documents provided such as spelling mistakes, validity, photo likeness, address details not matching, clear signs of tampering then RPC cannot accept the business and the nominated Money Laundering Officer or Deputy (see below) should be informed who will decide whether to make a Report to the National Crime Agency.

There are also transactional issues with which you should be aware and if theses raise any suspicion again the nominated Officer (or deputy) should be informed.

Some warning signs that may constitute suspicious activity are:

  • Transactions are not at arm’s length
  • No apparent reason for using the firm – i.e. property outside of our normal operation area
  • A transaction is carried out for less than the market rate
  • Settlements in cash
  • RPC asked to hold cash in our client account
  • Reluctance to provide information for identity checks
  • Intermediaries used to hide identification of purchaser
  • Funds going overseas to a third party
  • Significant and unexpected improvement in their financial position
  • Customer reluctant to show source of funds
  • Reducing the price below Stamp Duty levels and increasing price of fixtures and fittings

If an agent is concerned by one or more of the above then they are to report it to that company’s nominated Money Laundering Officer, or in their absence the Deputy Money Laundering Office. A report will then be filed on the National Crime Agency website: nationalcrimeagency.gov.uk

 

Nominated Money Laundering Officer

Graeme Dowd, Director is RPC Land & New Homes’ Money Laundering Officer

Peter Bowden, Managing Director is RPC Land & New Homes’ Deputy Money Laundering Officer

However, the responsibility for Money Laundering is companywide and Senior Managers and Directors are personally liable if they don’t do everything they need to do to protect their business from money laundering or terrorist financing.

 

Record Keeping and Audit

All records must be kept for at least 5 years from the end of the client relationship or transaction if there is to be no repeat business with the same client. This must include any suspicion reports and subsequent actions.

This information must be kept within the Property or Development file.