SmartSearch launches innovative new solution to help ...

Leading digital compliance firm SmartSearch has launched an innovative new solution to help professionals working within the UK property sector to detect and prevent money laundering.

The new service - Source of Funds - offers SmartSearch’s clients a quick and accurate way to determine the source of a customer’s’ funds when buying a property, enabling conveyancers to easily spot anything suspicious.

The Source of Funds feature uses open banking technology to gather key financial evidence from a buyer or seller’s bank account, delivering the information in less than a minute.

This quick and efficient service means that SmartSearch’s clients can access an individual’s bank statements to determine the source of the funds being used to complete the property transaction.

This level of intel is absolutely vital in the fight against money laundering – especially for the property industry – as it is one of the most targeted sectors – and this is down to two key factors.

The first is the high value of the assets themselves, particularly in London. The average property price in the capital is now £729,591, while almost one in ten London homes are now worth £1million or more.

The second is that, in the UK, properties can be bought, owned, and sold by companies and organisations.

Abusing their position

While most corporate property transactions are legitimate, the way the sector is set up means shell companies – corporations without active business operations - can also buy properties. While these types of corporations are not necessarily illegal, they are often used illegitimately as their set up means the real buyer i.e. the person financially benefiting from the transaction, can remain anonymous.

Therefore, purchasing property in the UK is a common tactic used by organised criminals to launder the proceeds of their illegal activities.

In response, the UK government and regulatory bodies have put numerous anti-money laundering rules and regulations in place, requiring estate agents, conveyancers, and mortgage lenders to run thorough due diligence on the buyers and sellers of UK properties – including identifying the ultimate beneficial owner (UBO) of any corporate buyers.

However, despite these rules and regulations, it is estimated that around £6.7bn worth of UK property has been acquired with suspicious funds since 2016.

There are many reasons for this – corrupt individuals working within the industry is one, as they are abusing their position to enable the financial criminals to use their businesses to clean their cash.

And while this does happen, it is not the most common reason why money launderers are able to abuse the UK property market. That is down to poor anti-money laundering (AML) procedures amongst estate agents, conveyancers, and property developers.

For example, according to SmartSearch’s research, less than half of property development firms carry out verification checks on all new business clients, and less than a third on individual customers.

Of those that do verify business clients, only 38% identify the ultimate beneficial owner of that firm, and the same number say they check the financial records. This means the vast majority are not running proper ID or financial checks on their customers, leaving gaping holes that money launderers will be more than ready to take advantage of.

But even those checking financials are not always doing a thorough job. For example, many businesses incorrectly assume that funds being transferred from a bank should be classed by default as clean money. Others think that if they have checked a customer’s identity, that’s enough in terms of due diligence. But it is these kinds of assumptions that enable serious crime and is why it is so important that firms involved in the property sector are absolutely thorough when it comes to due diligence.

Beneficial owners

The only way to be sure that property is being bought legitimately, is to use the very latest in identification and verification techniques in combination with accurate source of funds information.

SmartSearch can offer both services - full, robust verification from one of the most advanced solutions on the market and Source of Funds checks.

Through SmartSearch’s triple-bureau credit checks and real-time biometric technology, estate agents, conveyancers and property developers can authenticate the ID presented and the person presenting it to ensure they are who they say they are. Plus, thanks to SmartSearch’s business and UBO check solutions, firms can also verify business clients and their beneficial owners, enabling them to identify who is at the top of the corporate tree.

Once an individual has been verified, they can then be screened against Global Watchlists to identify any sanctions or PEPs.

Then, this information can be used to identify the bank accounts of the individual and using the Source of Funds checks service, SmartSearch can access the financial information needed to ensure that the money being used to purchase a property is coming from a legitimate source.

And the benefits don’t end there – not only can SmartSearch’s solutions quickly and easily identify any suspicious activity, but they can also ensure all regulatory requirements are met with full and complete audit trails.

Furthermore, because the process is so easy and the results instant, using SmartSearch’s services also streamlines customer onboarding and drastically reduces the workload associated with manual checks - saving the business valuable time and money.

SmartSearch can even help businesses that do not have a good history of AML processes to get themselves into a clean and compliant position with its batch upload service. This unique solution allows clients to retrospectively checks their client data base for any sanctions or PEPs, and then upload the entire dataset onto the platform so it can be monitored on an ongoing basis.

Speaking about the new Source of Funds checks, and how powerful a tool it is when combined with SmartSearch’s other services, Martin Cheek, managing director at SmartSearch said:

“Source of funds checks can prove instrumental in the fight against money laundering, and we are proud to provide businesses with a powerful tool that not only uncovers the true origin of funds but also disrupts the activities of criminals.

“With the source of funds feature, SmartSearch continues to lead the way in delivering comprehensive compliance solutions."

Sources:

*https://www.transparency.org.uk/uk-money-laundering-stats-russia-suspicious-wealth

https://www.zoopla.co.uk/house-prices/london/