Our Conveyancing Department considers the impact of money laundering in relation to conveyancing transactions.
Money Laundering is ‘the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses’. It is a fundamental part of all firms’ risk management policies and is constantly kept under review. The Law Society regularly update their Practice Guidance on the same.
Conveyancing transactions are attractive to criminals looking to launder money as it appears very much legitimate. This is because law firms that carry out conveyancing transactions hold large amounts of money in their client accounts, transfer money relating to property transactions, have access to financial markets and can justify buying large assets.
Being vigilant is of high importance for solicitors; to be aware how to spot and identify possible money laundering clues. These can include false passports/driving licences and false proof of address documents (e.g. bank statements). Bank statements can be easily forged online. Spelling errors and unlikely transactions can indicate this, for example, a purchase from somewhere that no longer exists like BHS.
It is vital to be aware of unusual source of funds (e.g. a very large gifted deposit from someone unrelated to the transaction). To provide an extra level of security, each client paying money into the client account should have an Anti-Money Laundering search undertaken; third parties such as giftors should also be subject to this. It is similarly important to stay vigilant when dealing with other solicitors. To determine whether a practitioner is legitimate or not, we can conduct a ‘Find a Solicitor’ check through the Law Society website or a ‘Lawyer Checker’. Generally, we should look out for lack of communication means (e.g. no telephone number, an email address with no domain, sudden change of bank details etc) and simple mistakes like spelling errors and false addresses.
Although it may seem as if there are many things to look out for, there are simple steps that can be taken to mitigate the risks involved. For example, solicitors must not solely rely on ‘Find A Solicitor’ checks to corroborate that the firm they are dealing with is legitimate; they should carry out further checks on the Solicitors Regulation website.
Anti-Money Laundering checks are vital and should be carried out on each client and any party that will be paying into the client account. As part of this, ensuring certified photo identification is held on the file dictates good practice. There must also be evidence linking the seller’s details to the property that they are selling – e.g. two forms of recent proof of address that is no longer than 3 months old. When raising legal enquiries, it is useful to enquire as to the seller’s identity. Throughout the transaction, a list of potential ‘red flags’ may be kept to keep track of suspicious activity. A stringent record of a buyer’s source of funds is recommended in order to be certain there is no deceptive behaviour. This list should not only be for the fee earner but other staff that work with the file also – e.g. assistants that may speak to them regularly. This is recommended as it shows appropriate measures are being taken.
The implications for a solicitors firm with regards to Money Laundering can be serious. If serious suspicious activity is detected that has no logical reasoning, it should be bought to the attention of the firm’s appointed Money Laundering Officer (MLRO) who will determine whether to report the activity to the National Crime Agency. If the MLRO is not available, the Deputy MLRO should be contacted instead.
For further guidance on the above points and for more information, the following sites provide guidance: