Fighting Fraud and how technology can help…
With the 26th June AML deadline just days away, Stephen Murray, Business Development Director at PSG looks at the risk of fraud in the conveyancing industry.
As we all know Conveyancing is one of the highest risk areas for fraud and criminals are targeting firms and their clients in ever more sophisticated ways.
Since the start of the year and at the time of writing the SRA has sent over ninety Scam alerts, an average of almost three a week, and we see news stories about monies being lost to fraudsters on an increasingly regular basis. The recent court cases of Dreamvar V Mishcon De Reya and Purrunsing V A’Court & Co & Anor have created wide debate across the sector and without a doubt fraud and cybercrime remains the hottest of topics in the industry.
The introduction of the EU’s 4th Anti-Money Laundering Directive into UK Law via The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 should be on the statute books by the 26th June 2017. It’s important to note that the triggering of Article 50 to leave the EU has no immediate effect as until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the government will continue to negotiate, implement and apply EU legislation.
The so-called Great Repeal Bill will transpose all EU Law in UK Law ready for the full EU separation in March 2019
In any event, it is extremely unlikely there would be any watering down of AML/CTF regulations in the future, indeed the opposite is more likely.
What does this mean in practice?
- An Increased emphasis on a risk-based approach from the 3rd attempts to ensure that AML compliance does not become a tick box exercise. Although the existing UK regulations have always given greater weight to this approach
- The reduction of the threshold for Cash traders to 10,000 Euros regardless of whether this is a single or via a series of linked transactions.
- Increased focus on the Identification of Beneficial owners bringing broader scope to identifying Persons with Significant Control.
- Politically Exposed Persons categories have been broadened and now include domestic PEPs for Enhanced Due Diligence.
- Checking domestic and foreign Sanction files should be a standard part of your Counter Terrorist Funding processes.
- Small changes to the Suspicious Activity Reporting (SAR’s) regime.
By far the easiest and most efficient ways to check for PEP’s or those on Sanction files is by utilising the Alert features normally included as part of electronic ID verification product.
However, there remain differences of opinion on the use of electronic ID verification and it should not be considered a panacea. That said, it is now your best and the first line of due diligence when onboarding any new client and in many cases sufficient on its own.
What does the Law Society say?
The Anti-Money Laundering Practice Note 2013
“(Electronic verification) will only confirm that someone exists, not that your client is the said person. You should consider the risk implications in respect of the particular retainer and be on the alert for information which may suggest that your client is not the person they say they are.”
And goes on to say: “While we believe electronic verification can be a sufficient measure for compliance with money laundering requirements, there may be circumstances where it will not be appropriate.”
Choosing a data provider to partner with for AML ID Verification is not as straight forward as you may hope. It’s important to note that a high “match” or “pass” rate should not be your main consideration in selecting an AML product. You must make time to understand the scoring process behind any ID Profile and ensure it satisfies your approach to risk. It’s interesting to note that one of the best ways to increase match rates is to remove any scoring on data of birth matching. However, both the Law Society and the JMLSG suggests checking date of birth as being best practice.
Fraud doesn’t end with ID and there has been a spate of incidents where criminals have provided bank account details to firms to fraudulently obtain proceeds of sale or hoodwink conveyancers into sending purchase funds to fake firms bank accounts. Data and technology can support here too.
First and foremost, though this is about adopting robust policies and procedures and embedding these into the culture of your firm with training, training and more training to support confidence and understanding.
The 3 step solution from PSG
- Enhanced AML
Using the latest technology from global ID specialists GBG, you can verify the identity of more than half the world’s population, access a broad portfolio of PEPS information and perform sanctions screening. This secure and automated service streamlines your processes, supports your AML obligations and removes the risk and costs associated with manual checks.
- Consumer Bank Account Validation and Verification
Accessible and usable worldwide, this cost-effective service checks bank account, name and address details against the latest reference data – online and in real time to verify that the account belongs to the customer. The check will alert you when an entered bank account has been closed, when a match hasn’t been found or if account details known to be fraudulent are supplied, allowing you to protect all parties in the transaction.
- Lawyer Checker
Combat the increasing risk of vendor conveyancer fraud by checking the previous use of the client account to which you are sending funds. This low cost measure allows you to check the client account purported to belong to a legitimate vendor’s solicitor is just that and not just a gateway to the fraudsters pocket.
Additional Practice Support Services
We have recently launched a range of Practice Support Services to assist in compliance and optimising best practice and performance. Working closely with Legal Eye and Training Eye we can offer support with your cybercrime policies, data protection and IT security whilst ensuring that you and your staff are fully trained in understanding Cyber Security.
For more information on Practice Support Services, our AML solution or Bank Account Validation and Verification services, contact your local PSG office which can be found at www.psgconnect.co.uk.
You can also contact our national customer services team on [email protected] or by calling 01226 246644
This article was submitted to be published by PSG as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.