Bad Property Management

Money Laundering

Money laundering through buying property is a big problem for property professionals. It is difficult to spot, and as the transactions are more easier and swifter and in cash it is a much more attractive and tempting offer to get into,  But anyone being connected or involved however remotely or without knowledge can still be had up and arrested and charged with aiding and abetting serious crime and money laundering activity. The area is vast and vastly interesting for anyone interested in crime , criminality and the proceeds and mass management and laundering of criminal proceedings.

The National Federation of Property Professionals   have issued a special guidance sheet, as well as providing much more information which is of help to property developers, landlords, estate agents, tenants and members of the public.

NFOPP Money Laundering and Property Guidance

The Home Office estimates that serious organised crime in the UK generates approximately £20 billion a year. Purchasing property in the UK and overseas continues to be a common method used by serious organised criminals to launder the proceeds of criminal activity. The advantage of doing so is that large amounts of criminal funds can be ‘cleaned’ in a single transaction.

Due to the scale of the problem and the apparent need of criminals for property, the potential damage  is considerable,

Here are the examples of the kind of behaviour to watch out for:  The full guidance is at NFOPP Money Laundering and Property Guidance

13.          What risks should I look out for to help me and my colleagues spot suspicious behaviour?
Risk can be categorised into country or geographic risk, Customer risk, and transaction risk.

Some warning signs are set out below but this is by no means an exhaustive list and neither are the circumstances noted automatically suspicious, but they are general indicators of what could be suspicious dependent upon the surrounding circumstances.

• Transactions which are not at arm’s length /not between independent parties;
• No apparent reason for using the firm, e.g.  the scale of the transaction or location of the property suggests that another firm would have been better placed to act;
• Part or full settlements in Currency.  This could indicate tax evasion , or avoidance of a confiscation order, insolvency, or a matrimonial settlement;
• Request that the estate agent or auctioneer hold large sums of money in their Client Account for no apparent reason, which is then refunded;
• Customer or Counterparty declines services or facilities that they should find attractive. This may indicate a bogus transaction;
• Undertaking Customer due diligence is difficult. Is their reluctance justifiable, or exaggerated and defensive?

Customers and counterparties are unable or reluctant to provide information about the source of their funds/provenance of funds when this is requested. Although this is not a compulsory requirement for all transactions, in higher risk situations property professionals may wish to seek this information;

• Use of intermediaries without any justification and in order to hide  involvement;
• Funds from the sale or rental of a property being sent to a high risk jurisdiction or to an unknown third party;
• Significant and unexpected improvement in financial position, e.g. buyers are unable to give any proper explanation for their increased funds;
• Sales at prices which are significantly above or below market price, or a transaction which appears uneconomic or inefficient;
• Pattern of the transaction inexplicably changes;
• Transaction progresses at an unusual speed- beware of requests for unusually or unnecessarily expedited transactions;
• Successive transactions, especially of the same property in a short period of time with unexplained changes in value;
• Introduction of unknown parties at a late stage of transactions;
• Property value is not in the profile for the consumer;
• Unusual sources of funding , e.g. use of complex loans or other obscure means of finance;
• There are unexplained changes in financial arrangements;
• Owner/Landlord/builder is not fully complying with their legal obligations this may result in a saving. If the relevant legal obligation is criminalised if breached this saving may represent criminal property and therefore money laundering.

Find more at NFOPP page and their special guidance information page:

NFOPP Money Laundering and Property Guidance