The latest Solicitors Regulation Authority (SRA) Risk Outlook 2020-21 gives a stark reminder to the conveyancing industry that they are most at risk to be targeted by money launderers.
It states that conveyancers and the firms they work for need to be more alert as they are currently at ‘further risk’ of being used to launder money because the stamp duty land tax (SDLT) holiday has caused a pent up demand of property transactions which has drove up the value of properties, in order to complete before the SDLT ends on the 31st March 2021.
In addition, wealthy individuals from overseas ‘who are looking to exploit the investor visa scheme might use solicitors to make UK investments using criminal proceeds’. Those solicitors working in the London property market are targeted and are at a much higher risk of being caught in the middle.
Firms who have made money laundering compliance roles redundant are vulnerable too. By removing these vital positions from their payroll is putting themselves at high risk too as it could lessen their ability to carry out compliant risk assessments, customer due diligence (CDD) and source of funds checks – and should therefore, continue to meet their legal duties.
The pandemic and lockdowns have caused many difficulties for firms, in particular, they have found CDD, including appropriate levels of identification and verification, more challenging because of restrictions. The SRA has stipulated that ‘electronic verification tools can help firms carry out these tasks’ but its important to use them correctly and appropriately.
The SRA understand that many firms have evaluated their risk assessments following Covid-19 and updated them accordingly in line with the pandemic situation, however, it has been recognised by the SRA that some have found it hard to make decisions on future developing risks – an example of this is changing from face-to-face to online communication. This switching from one method of working to another can expose firms to different risks, so they will need appropriate systems and methods to mitigate it – as criminals with seize this opportunity, where firms have not fully understood the risks involved and adapted their practices, and will take advantage of changing circumstances to trick firms and their clients.
The SRA also reported on vendor fraud because there had been an increase of cases whereby properties are being put up for sale by fraudsters without the consent or knowledge of the genuine owners – which have been homes of elderly or vulnerable people. Key points of what to look out for are:
- the property price is significantly over or under the market value
- the seller or buyer is reluctant or unable to provide documents
- ID documents do not look genuine
- there is pressure to complete the transaction very quickly
- minimal work is instructed, for example, no searches are requested
- there are complex or unusual circumstances around the transaction
- it is a cash purchase of a property
- funds are coming from or going to unconnected third parties.
Also, in addition to carrying out appropriate CDD for all transactions, the SRA said you must:
- properly identify and check the suitability of your employees and supervise their work
- report to us and the appropriate law enforcement authorities any concerns about someone carrying out work which you know or suspect might be linked to fraudulent activity.
To read the report in full click here.
