Anti-money laundering within the property industry: Why The Two Tier Approach?



By Tim Barnett, chief executive of Credas – the anti-money laundering technology platform

Each year there are over 1.5 million homes listed for sale in the UK and the potential sellers of each all require anti-money laundering checks – often there’s more than one check per property in the case of joint ownership.

Since June 2017 property buyers, at the point that an offer is accepted, are required to provide identification for the purposes of the agent carrying out such checks too. Not to mention the doubling up of checks by the legal representatives in each sale and purchase.

So the consequence of the regulations therefore is that far more AML checks are carried out each year than actual sales transactions – millions more.

In other words the government, in all its wisdom, is taking the question of clean money for property purposes rather seriously and no more so than against a backdrop of rising terrorist threats, organised criminal activity and sanctions on those connected to regimes that do bad things.

And so, it’s more difficult these days to wash your bad cash through the property industry and as AML technology continues to improve and government tightens the rules further as they seem set to do, the prospect of ‘bad guys’ using this industry to clean their ill-gotten gains diminishes and we can all hold our heads up high as not being complicit in such activities.

Except for one glaring anomaly – in fact 209,393 of them.

Because, did you know that of all the new homes built and sold each year in the UK, none are subject to anti-money laundering checks by the housebuilder selling them? Yes, the lawyers for each purchaser will do their AML checks I’m sure.

However, doesn’t this two-tier system make you wonder why, if house builders are exempt, estate agents are compelled to shoulder their own separate AML burden – after all, agents do not handle the cash?

The government can’t have it both ways – it’s either important at the point of sale and purchase as in the case of estate agents listings and offers, or it’s not – as seemingly in the case of new homes developers.

In the last 12 month period that figures are available for and based upon EPCs issued on new homes, that’s 209,393 opportunities for money to be laundered through the system. Worse, this is not just nearly a quarter of a million loopholes but loopholes that are on average worth £367,200 per time. This makes for a frankly astonishing and wholly unacceptable gap of £76.9 billion in money laundering opportunity for criminal gangs, ISIS, sanctioned oligarchs and the like.

I find it incredible that the UK government has allowed this gaping chasm of unlawful funds fiddling to remain open.

Our research suggests that Britain is the second most prolific country on the planet for money laundering activity. It’s estimated that £87.9bn of dodgy money is filtered through the UK each year, second only to the USA which tops the table at a staggering £216bn.

When looking proportionally at the estimated amount of cash laundered in each country as a factor of GDP, Britain at 4.3% of GDP is fourth in the rankings below Belgium, Luxembourg and Israel.

I humbly suggest that politicians might bring themselves to closing this new homes sector disparity if we as a nation want to be able to hold our heads up high amongst others on the world stage rather than resembling a nation that seemingly does not care much about such things at all.

It would seem all too easy to do so, wouldn’t it?

Each year there are over 1.5 million homes listed for sale in the UK and the potential sellers of each all require anti-money laundering checks – often there’s more than one check per property in the case of joint ownership.

Since June 2017 property buyers, at the point that an offer is accepted, are required to provide identification for the purposes of the agent carrying out such checks too. Not to mention the doubling up of checks by the legal representatives in each sale and purchase.

So the consequence of the regulations therefore is that far more AML checks are carried out each year than actual sales transactions – millions more.

In other words the government, in all its wisdom, is taking the question of clean money for property purposes rather seriously and no more so than against a backdrop of rising terrorist threats, organised criminal activity and sanctions on those connected to regimes that do bad things.

And so, it’s more difficult these days to wash your bad cash through the property industry and as AML technology continues to improve and government tightens the rules further as they seem set to do, the prospect of ‘bad guys’ using this industry to clean their ill-gotten gains diminishes and we can all hold our heads up high as not being complicit in such activities.

Except for one glaring anomaly – in fact 209,393 of them.

Because, did you know that of all the new homes built and sold each year in the UK, none are subject to anti-money laundering checks by the housebuilder selling them? Yes, the lawyers for each purchaser will do their AML checks I’m sure.

However, doesn’t this two-tier system make you wonder why, if house builders are exempt, estate agents are compelled to shoulder their own separate AML burden – after all, agents do not handle the cash?

The government can’t have it both ways – it’s either important at the point of sale and purchase as in the case of estate agents listings and offers, or it’s not – as seemingly in the case of new homes developers.

In the last 12 month period that figures are available for and based upon EPCs issued on new homes, that’s 209,393 opportunities for money to be laundered through the system. Worse, this is not just nearly a quarter of a million loopholes but loopholes that are on average worth £367,200 per time. This makes for a frankly astonishing and wholly unacceptable gap of £76.9 billion in money laundering opportunity for criminal gangs, ISIS, sanctioned oligarchs and the like.

I find it incredible that the UK government has allowed this gaping chasm of unlawful funds fiddling to remain open.

Our research suggests that Britain is the second most prolific country on the planet for money laundering activity. It’s estimated that £87.9bn of dodgy money is filtered through the UK each year, second only to the USA which tops the table at a staggering £216bn.

When looking proportionally at the estimated amount of cash laundered in each country as a factor of GDP, Britain at 4.3% of GDP is fourth in the rankings below Belgium, Luxembourg and Israel.

I humbly suggest that politicians might bring themselves to closing this new homes sector disparity if we as a nation want to be able to hold our heads up high amongst others on the world stage rather than resembling a nation that seemingly does not care much about such things at all.

It would seem all too easy to do so, wouldn’t it?

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