SPECIAL FEATURE: Conveyancers can help clean up the UK’s dirty money problem – SmartSearch

SPECIAL FEATURE: Collette Allen, Client Services Director at SmartSearch, has written an article that covers the subject of how conveyancers can help clean up the UK’s dirty money problem.

Latest analysis by leading anti-corruption organisation Transparency International UK has revealed that at least £1.5 billions-worth of UK property is owned by Russians accused of financial crimes or with links to the Kremlin.

It is an alarming figure, but even more worrying is that the true figure for illicit wealth invested in the UK is almost certainly far higher.

According to Transparency International UK, almost 90,000 properties across the country are owned by secretive companies and, as a result, it is impossible to give an exact figure for property assets connected to Putin’s regime.

Concerns have been raised since the Nineties about the influx into London of huge amounts of Russian money from sources that can be difficult to identify.

While it is welcome that the government has responded to Russia’s invasion of Ukraine by finally bringing forward the Economic Crime (Transparency and Enforcement) Bill, it should be recognised that legislation can only partially address the scourge of dirty money being laundered in the UK by criminals from Russia, and, indeed, from other countries.

Shell companies

The Bill will create a register for foreign owners of UK properties, and will mean they have to provide details of the beneficial owners instead of using shell companies to conceal true ownership, and will also have to verify their identities with Companies House.

This will bring greater transparency to conveyancing, but such is the legislative process required before the bill can become law that it has been estimated that even with fast-tracking it could be a year before the register becomes operational.

So, what can be done now in order to address the issue of property transactions being used as a means to launder dirty money, and to enable solicitors to identify who they are dealing with and comply with their responsibilities on anti-money laundering (AML) checks?

Ideally a holistic approach should be taken, with both legislation and technology being harnessed to beat the criminals.

Due diligence

Effective and comprehensive due diligence is the key to preventing fraudulent property transactions, and conveyancers have a vital role to play in this.

It is arguable that alarm bells should have rung during conveyancing undertaken for at least some of the £1.5 billions-worth of UK property that Transparency International UK has identified as being owned by Russians allegedly involved in financial crimes or connected to the Kremlin.

Clearly, that did not happen despite the professional requirement for conveyancers to comply with anti-money laundering (AML) regulations, including verification of the identities of buyers.

Given the high fines levied in recent years upon conveyancers found guilty of not conducting AML due diligence, it is likely that most failures resulted from mistakes rather than from criminal intent.

Nowadays, forged documents are so realistic that it takes an expert to identify them, and as a result any conveyancers using paper documents or online documents for verification purposes risk being fooled by fakes.

Property transaction

The only way to avoid this risk is by utilising electronic verification, which checks latest credit reference data to establish if the person in the documents that have been presented in conjunction with a property transaction is real or a fraud.

Electronic verification can also vet individuals against global sanctions and politically exposed lists – something that is vital in the current political climate, and which is a remarkably quick process.

At present, the government has made use of electronic verification optional. However, those conveyancing firms which value their reputations – and wish to avoid potential punitive fines for inadvertently breaching AML regulations – are using this technology now rather than waiting for it to be made mandatory.

The UK undoubtedly has a problem at present with dirty money being laundered through property assets. Conveyancers can help to ensure that it does not remain that way.