- 1 What is anti-money laundering legislation?
- 2 What are anti-money laundering checks?
- 3 When will the anti-money laundering checks be carried out?
- 4 Examples of money laundering
- 5 How big is the problem?
- 6 What are ‘Source of Funds’ enquiries?
- 7 What is Extended Customer Due Diligence?
- 8 Examples of documents proving identity
- 9 Further checks for companies, charities, estates and trusts, etc.
What is Anti-Money Laundering Legislation?
Anti-Money Laundering legislation is designed to catch a range of financial-related criminal activity.
It’s a legal obligation for conveyancers and solicitors to carry out checks on clients. This involves verifying a number of records, including proof of identity, which are designed to prevent money laundering.
What Are Anti-Money Laundering Checks?
Your conveyancer is required by law to carry out what is known as ‘Client Due Diligence’ (or ‘CDD’) on every client. A conveyancer will commit serious criminal offences if they fail to follow the extensive obligations in the Anti-Money Laundering and Counter-Terrorist Financing legislation.
Conveyancers must take steps to verify the true identity of ALL clients, even if they may have acted for them for years. Usually, we will expect to see a driving licence or passport, and some other form of identity verification, such as utility bills that link you to your current address. We may also carry out electronic verification using external companies and agencies to satisfy that you are who you claim to be.
Conveyancers have been jailed for turning a blind eye to suspicious circumstances. We are also required to notify any suspicious circumstances to the National Crime Agency, without our clients’ consent or knowledge.
When Will the Anti-Money Laundering Checks Be Carried Out?
While many of the essential checks are usually conducted at the beginning of the legal process, our obligations will continue throughout the entire transaction. We have to consider constantly whether anything is suspicious. This includes changes in the attitude of the client to the transaction, sudden and unexplained urgency, changes of parties or price, or where the money is coming from or going to, etc.
Examples of Money Laundering
The following situations are examples of money laundering that will trigger the legislation:
• Any form of tax evasion (such as VAT or Stamp Duty Land Tax). Not agreeing to pay the full amount of SDLT due on a transaction, not declaring other considerations not mentioned in the transfer, refusing to pay the tax due, and so on.
• Using a property in breach of a planning enforcement notice.
• Selling a property but refusing to carry out an asbestos survey, where required to do so by law.
• Buying a property at an artificially inflated price, in order to get a bigger mortgage on it.
• Not having an Energy Performance Certificate for a property, when required to produce one by Trading Standards.
As you can see, the legislation covers a wide range of actions that might not obviously be ‘criminal activity’.
How Big is the Problem?
The Treasury has estimated that, in the UK alone, at least £10 billion a year is laundered through the regulated sector, which includes conveyancers, accountants, banks and estate agents. Property transactions are often used by money launderers as a way of hiding their cash.
What are ‘Source of Funds’ Enquiries?
We also need to be sure that there is nothing unusual about the source of the money you are using to buy the property (known as ‘Source of Funds’ enquiries). Please do not be offended by this – this is a standardised procedure that we are required to do by law. For example, a person of modest means suddenly buying a million pound property for cash could be as a result of an inheritance, or a lottery win, but it could also be as a result of criminal activity.
What is Extended Customer Due Diligence?
Conveyancers have to apply what is known as Extended Customer Due Diligence, in some cases. Where this applies, we will need to go further to check your identity using other methods of identity verification. This may include electronic searches and enquiries. This will apply where, for example, we do not meet you face-to-face at the start of the transaction. It will also be required where you (or your family or associates) are involved at a senior level in politics or industry.
Examples of Documents Proving Identity
We will usually want at least two sources of verification from you. We also need to be sure that you are the person named in the documents. There are other recognised documents that may also be used to verify your identity which might include:
• current signed passport
• birth certificate
• current photocard driver’s licence
• residence permit issued by the Home Office
• benefit book or original notification letter from the DWP
• council tax bill, utility bill or statement
• a recent original mortgage statement from a recognised lender
• local council or housing association rent card or tenancy agreement
• HMRC self-assessment statement or tax demand
• house or motor insurance certificates
Further Checks for Companies, Charities, Estates and Trusts, etc.
There are also special rules we have to follow when acting for companies, partnerships, clubs, associations, trusts, the estates of deceased persons, and so on.
As well as checking the bona fides of the company representatives, or trustees, we may also have to identify who controls or owns the shares in the organisation. In relation to estates, trusts and charities, we may need to identify not just the trustees, but also consider the beneficiaries.