Covid-19 restrictions make due diligence difficult in property sales and purchases.
As the UK housing market slowly returns to normal, the risk of money laundering to real estate has not diminished. In fact, there is a strong argument that the sector is more susceptible to money laundering than ever before.
As Covid-19 restrictions took hold, the usual routes used by criminals to dispose of large sums of cash disappeared. Cash-intense business such as casinos were forced to close, while the physical transportation of money across borders became near impossible. With such tight restrictions in place, it is not surprising that money launderers should look to the disposal of their assets as a means of both realising cash and recovering financial losses suffered by their ‘businesses’.
Property acquired with illicit funds several years ago might now be considered the perfect asset to free up capital, while those looking to dispose of criminal proceeds could consider the UK housing market – especially the prime markets of central London – an ideal investment opportunity.
It is also the case that estate agents need to secure sales to keep their businesses afloat, something exacerbated by the practical difficulty of undertaking effective customer due diligence (CDD).
A lack of face-to-face contact with a seller or purchaser has always been the highest potential risk factor for someone carrying out CDD and Covid-19 might well be given as a reason for contact not taking place.
Then there is the difficulty of obtaining certified identification documents at the moment.
Now, more than ever, agents will have to take a risk-based approach, and artificial intelligence will play a key role in this.
In addition, it might be appropriate to undertake simplified due diligence such as the use of open-source research such as internet searches. It is more important than ever that agents record the methodology used to establish the level of risk posed by the seller or buyer.
Right now, the sector may be more susceptible to money laundering activity, but agents cannot use the current crisis to bypass their legal obligations; nor can they allow those seeking to launder funds to use Covid-19 as an excuse for failing to provide the information needed to complete a transaction.
Jerry Walters is managing director of FCS Compliance