David Holland, chief inspector and nominated officer at the Insolvency Practitioners Association (IPA) spoke about the complexities of anti-money laundering (AML) and shared insight into best practice for fixed charge receivers. 

In an environment where regulatory bodies scrutinise AML practices rigorously, every Registered Property Receiver (RPR) should be able to demonstrate comprehensive risk assessments, well-documented processes, and targeted training to prevent allegations of negligence. Doing this demonstrates due diligence and a commitment to maintaining the highest standards of integrity and compliance.
 
The importance of understanding AML risks and documenting them cannot be overstated. David emphasised this is not a box-ticking exercise but a proactive, strategic approach to safeguarding businesses against the ever-present threat of money laundering.
Background and Research
A 2020 Government report into money laundering and terrorist financing designated property transactions as high-risk areas, underscoring the critical role that real estate dealings play as potential money laundering and terrorist financing activities.
 
A recent in-depth investigation by global anti-corruption coalition, Transparency International, into more than 400 corruption and money-laundering cases, handling an estimated £325 billion, identified nearly 600 UK businesses, institutions and individuals who have helped corrupt individuals, unwittingly or otherwise, obtain, move and defend their ill-gotten gains.
 
These included 118 luxury goods and services firms, 81 law firms, 86 banks and financial institutions, 62 accountancy firms (including all of the Big Four), 178 educational institutions and 37 architectural and design firms.


Legislation
There are no less than 8 relevant areas of legislation to be aware of when considering your anti-money laundering obligations, with penalties for failure to comply ranging from fines to life imprisonment. Please see end for list of laws, potential offences and penalties.
 
What do they mean to a Registered Property Receiver?
You must carefully review the structure of your firm and subsidiaries.  
 
Estate Agents Act 1979
This Act applies – subject to subsections (2) to (4) below – to things done by any person in the course of a business (including a business in which he is employed) pursuant to instructions received from another person (in this section referred to as “the client”) who wishes to dispose of or acquire an interest in land:

1. for the purpose of, or with a view to, effecting the introduction to the client of a third person who wishes to acquire or, as the case may be, dispose of such an interest; and
2. after such an introduction has been effected in the course of that business, for the purpose of securing the disposal or, as the case may be, the acquisition of that interest;

In this Act the expression “estate agency work” refers to things done as mentioned above to which this Act applies.
This Act does not apply to things done by any person – in relation to any interest in any property – if the property is subject to a mortgage and he is the receiver of the income of it.
 
Further useful links:
Government guidance: Money laundering: understanding risks and taking action for estate agency and letting agency businesses
RICS guidance: Bribery, corruption, money laundering and terrorist financing
 
Do you need to be supervised?
 
RICS has now received advice from HMRC which clarifies that the scope of activities carried out by some agents will fall within the scope of the Money Laundering Regulations (MLRs) and those firms therefore need to register for supervision.
See RICS: Do you need to register for AML supervision
 
To establish whether the activities undertaken by your firm fall within the scope of the MLRs, consider whether your firm undertakes any of the following:

• Accountancy services
• Analysing, calculating and reporting financial information
• Producing client reports on financial accounts
• Company services
• Acting as company secretary
• Acting as a director
• Providing registered office addresses

What should an RPR do
AML should be an efficient machine with a thread running through training, policies, risk assessment and Customer Due Diligence (CDD). Regulation 18 requires firm-wide risk assessment to ensure there are effective policies, procedures, and controls in place to prevent money laundering and terrorist financing.
 
Key steps

1. Staff Training
   • Record and review effectiveness. Do staff know reporting process and requirements? Where are the policies kept and when where they last updated? Do they know the security features of a passport?
2. Risk Assessment, effective policies and procedures
   • know what Customer Due Diligence is required – and when Enhanced Due Diligence (EDD) is required.
   • Risk of reliance – Section 39 of MLR 2017 permits reliance on the Customer Due Diligence undertaken by a third party. The individual that seeks to rely on the due diligence will remain liable for any failure to apply such measures. Written agreement required and documents are retained for five years.
   • Client AML risk: Review your engagement process and CDD steps. When are you forming an engagement for AML purposes? Is there an easy exit plan for non-compliance prior to appointment?
   • Research AML reports – use open-source web searches and sign up for updates (see links below)
   • Be aware of sanctions
   • AML risks have changed in 2022 and 2023. They could be about:
     • Proceed of Crime
     • Process
     • Clean Money
3. Any suspicions of fraud, and criminal proceeds must be reported using Suspicious Activity Reports where appropriate. Criminals only have access to a limited number of addresses and people to front illegal activities. Patterns can be seen if you zoom out.

Useful CDD links:
Government guidance on ID checks:
Checking someone's driving licence information
How to prove and verify someone's identity
Introducing the New Passport design
 
AML reports and organisations

• BBC Panorama: Banking Secrets of the Rich and Powerful
• BBC News: FinCEN files: one of the world’s “dodgiest addresses” is in leafiest Hertfordshire
• International Consortium of Investigative Journalists
• Transparency International
• KYC360

 
Indicators of money-laundering
 
Know the signs and report the crime; you should make sure you are familiar with the following indicators and be on alert for them when dealing with both new and existing clients:
 

1. Transactions: Are transactions unusual because of their size, frequency or the manner of their execution, in relation to the client’s known business type?
2. Structures: Do activities involve complex or illogical business structures that make it unclear who is conducting a transaction or purchase?
   Assets: Does it appear that a client’s assets are inconsistent with their known legitimate income?
3. Resources: Are a client’s funds made up of a disproportionate amount of private funding, bearer’s cheques or cash, in relation to their socioeconomic profile?
4. Identity: Has a client taken steps to hide their identity, or is the beneficial owner difficult to identify?
5. Behaviour: Is the client unusually anxious to complete a transaction or are they unable to justify why they need completion to be undertaken quickly?
6. Political Status: Is the client engaged in unusual private business given that they hold a prominent public title or function? Or do they have ties to an individual of this nature?
7. Documents: Are information or documents being withheld by the client or their representative, or do they appear to be falsified?
   Geographical Area: Is the collateral provided, such as property, located in a high-risk country, or are the client or parties to the transaction native to or resident in a high-risk country?
8. Choice of Professional: Have you, or other professionals involved been instructed at a distance, asked to act outside of your usual speciality, or offered an unusually high fee?

Suspicious Activity Reports (SARs) and Defence Against Money Laundering (DAML) SARs
SARs are important tools in the fight against money laundering and they help identify patterns of activity and uncover networks of criminals involved in money laundering. Reporting suspicious activity through a SAR helps financial institutions maintain compliance with AML regulations and prevents them being complicit in money-laundering schemes.
 
Review effectiveness of your policies

• Have you got a record of SAR and DAML considerations and reporting?
• Can staff correctly explain what suspicious activity they should report and how?

 
 
Sanctions
Being able to recognise and comply with financial sanctions is not just a legal requirement; it's a strategic imperative for RPRs. Since January 2013, the Treasury’s Office of Financial Sanctions Implementation (OFSI) has been able to impose penalties for serious financial sanctions breaches. These can be the higher of £1m or 50% of the infringement and, since 15 June 2022, can include up to 7 years in prison (up from 2 years).
There are circa 36,000 entries currently under sanction.
Full details here: OFSI blog June 2022: New Enforcement Powers
 
Sanctions case studies

• Gov guidance: Dear Insolvency Practitioner – no 114 UK Gov Sanctions on Russia (highlights asset freezes on 100+ entities and individuals)
• United Nations Security Council: Sally-Anne Francis Jones, Al-Qaida Sanctions List
• United Nations Security Council: Hamid Hamad Hamid Al-‘Ali, Al-Qaida Sanctions List
• United Nations Security Council: Green Pine Associated Corp, Sanctions List

 
Relevant Legislation
There are multiple laws and pieces of legislation to be aware of when considering your anti-money laundering obligations, with penalties ranging from fines to life imprisonment:
 
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as amended from time to time

• Offence: Money laundering, terrorist financing, and non-compliance with the regulations.
• Penalties: Financial penalties can vary, and imprisonment for individuals involved can range from several months to several years, depending on the seriousness of the offence.

 
Proceeds of Crime Act 2002

• Offence: Handling the proceeds of criminal activities or failing to report suspicions of money laundering.
• Penalties: Penalties include confiscation orders to recover the proceeds of crime, and individuals involved can face imprisonment for several years, particularly for more serious offences.

 
Terrorism Act 2000

• Offence: A wide range of terrorism-related offences, including preparing for acts of terrorism, supporting terrorist organisations, and terrorist financing.
• Penalties: Penalties can include substantial fines and lengthy prison sentences, often ranging from several years to life imprisonment for the most serious offences.

 
Criminal Finances Act 2017

• Offence: Facilitating tax evasion, money laundering, and related financial crimes.
• Penalties: The penalties can include financial penalties for both individuals and corporations, as well as prison sentences for individuals involved in the offences.

 
Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019, ISIL (Da’esh) and Al-Qaida (United Nations Sanctions) (EU Exit) Regulations 2019 and Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019)

• Offence: Violating sanctions related to individuals and entities associated with terrorist organisations.
• Penalties: Penalties may involve fines and, in some cases, imprisonment for those who violate sanctions regulations.

 
Sanctions and Anti Money Laundering Act (2018)

• Offence: Various offences related to sanctions violations and money laundering.
• Penalties: Penalties can include fines, asset freezing, and imprisonment for individuals involved in serious offences.

 
Anti-terrorism, Crime and Security Act 2001

• Offence: A range of offences related to terrorism and national security.
• Penalties: Penalties can include imprisonment for individuals involved in terrorism-related offences.

 
The Counter Terrorism Act 2008, Schedule

• Offence: Detention and questioning of individuals at ports and borders for the purpose of determining involvement in terrorism.
• Penalties: Detention and questioning can occur, but this is not a criminal offence.