Property firms failing to detect criminal 'ghosts'

Property firms are still failing to make basic anti-money laundering checks (AML), and some may even unwittingly be helping politically exposed persons (PEPs) or those on sanctions lists, a survey suggests.

A poll of 500 regulated businesses in the property, finance, banking and legal sectors by AML platform SmartSearch claims to have uncovered a series of compliance failures.

More than half of property firms who responded are failing to carry out crucial “ghost-buster” checks on new business clients, the data shows.

“Ghost” firms are false entities created as part of a corporate infrastructure to hide the connection of a criminal beneficiary. 

They are often used by sophisticated criminals to obscure the real recipients of money laundering activity and they can escape detection if regulated firms fail to carry out ultimate beneficial owner (UBO) checks as part of their due diligence on new business customers.

Failing to verify UBOs can often lead to firms unwittingly approving Politically Exposed Persons (PEPs) or those on sanction lists, SmartSearch warned.

Meanwhile, many of the firms surveyed admitted to even more basic breaches of the AML compliance rules – 38% said they did not always carry out any verification checks on the owners or directors of new business customers, with 18% saying they never did so, 14% saying they did so “some of the time” and 6% saying they did so “occasionally”.

Martin Cheek, managing director of SmartSearch, said: “Not only are these omissions risking fines and reputational damage to the firms involved, but they are also creating an open invitation to criminals to dirty the UK’s economy with the financial proceeds of their miserable crimes.

“Regulated firms are legally obliged to identify UBOs as part of their compliance responsibilities and being able to check for them is a vital part of crime risk management and prevention for compliant businesses.

“However, without the right tools to do so, UBO checks can also seem like an impossibly complex procedure, which is probably why so many of the firms are not able to carry them out. But that is also a huge risk.

“This is yet another indication that electronic verification – which, in SmartSearch’s case, includes fast, robust UBO checks – is the most effective way for regulated firms to meet the AML regulations.”