‘From Russia With Cash’

The Channel 4 television exposé, “From Russia with Cash”, revealed that many London estate agents are still unaware of their full extent of their money laundering reporting and compliance obligations. The programme was made in 2015; before the recent sanctions now imposed on Russian investment in the UK following it’s government’s decision to invade Ukraine.

The documentary although focusing on Russian investment, naturally also applies to any suspicious investment transaction that’s conducted by any domestic or overseas buyer, and or where the person believes there is misappropriation of funds or the money is the result of criminal activity.

Criminals use estate agents to launder criminal money, and more than £180million worth of property has been investigated by police since 2004.

Estate agents and other financial professionals are expected to comply with the Money Laundering Regulations 2007 and the Terrorism Act 2000. HMRC provides guidance for estate agents which the courts expect firms to follow.

The Proceeds of Crime Act 2002 (POCA) defines this as “the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled further into criminal enterprises.”

The three principal money laundering offences are contained in sections 327, 328 and 329 of the Act. They are broadly drafted to cover almost any form of dealing with criminal money, assets or property and are punishable by a maximum of 14 years imprisonment and/or a fine.

Anyone working in the Regulated Sector must report suspicious activity to their companies nominated Money Laundering Reporting Officer if they know or suspect a person is engaged in a POCA money laundering offence. Failing to do so is a criminal offence carrying a maximum sentence of two years imprisonment. They should also ensure that they complete a “Suspicious Activity Referral” or “Suspicious Activity Report” known as a SAR form.

Suspicions may arise when a customer makes large cash transactions, is overseas, or appears to be acting on behalf of another person.

• Brand new customers carrying out large one off cash transactions
• Overseas customers
• An individual in a public position that carries a higher exposure to the possibility of corruption (including politically exposed persons)
• Complex business ownership structures with the potential for concealing beneficiaries
• Reluctance to provide identification
• Where the customer appears to be acting on behalf of another person and is unwilling to give details of those they represent non face to face customers.
Where a Suspicious Activity Could Arise from the above property investment

HMRC expect the SAR to contain as much information as possible. If the NCA refuses consent, the transaction cannot go ahead.

The 2007 Money Laundering Regulations place heavy civil penalties on firms that fail to maintain adequate anti-money laundering systems and procedures. Senior Managers are personally liable if they fail to do everything they need to protect their business from money laundering and terrorist financing.

HMRC recommends that every agent should have a policy statement based on the type of clientele they serve. Higher risk customers should be asked for additional information and payment made through an account in the customer’s name.

Estate agents should read the HMRC guidance on due diligence carefully. If information suggests a transaction may facilitate laundering, a SAR should be filed.

Agents should complete due diligence enquiries before entering a business relationship with a customer, but electronic data agencies may not satisfy the HMRC.

The anti-money laundering regulations can seem like a minefield and it’s worth always taking independent legal advice from a qualified lawyer.

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