Agents should ‘ditch documents’, says AML specialist

Anti-money laundering specialist SmartSearch has warned property agents are in serious danger of non-compliance with new regulations, unless they ditch documents and embrace a digital solution.

As the June 10 deadline approaches for estate and lettings agents to register with HMRC to ensure compliance, there are concerns that some agents are not yet prepared for the extra responsibility.

It is also believed that agents are relying on outdated methods of ID verification, which is leading to a rise in fraud.

In addition to next month’s deadline, many estate agents are still having to work through the requirements of the fifth EU Money Laundering Directive which came into force almost 18-months-ago.

As the outbreak of the coronavirus pandemic also led to an increase in attempted money laundering in the property sector, it has been a challenging period for the sector in trying to prevent fraud.

However, John Dobson, chief executive officer at SmartSearch, says there needs to be much greater awareness of the flaws in the practice of checking hard copy documents in the customer onboarding process, which he says is wide open to fraud.

He comments: “No doubt it is difficult for any sector to make the changes that are being asked of property agents in lettings and sales, and doubly difficult when facing a global pandemic.”

“The increase in organised criminal activity using the property sales market to flush through its dirty money, has been widely reported. But also, we’re seeing reports of serious spikes in fraud in the rental sector, where criminals are using fake IDs to rent accommodation as a base for their nefarious activities.”

He adds: “This is being allowed to continue because agents are still relying on manually checking somebody’s passport or utility bill as part of the customer onboarding process. But criminals are turning out highly sophisticated forgeries of these documents which, in a sector as busy as it has been this past 12 months, are not undergoing the necessary scrutiny.”

For agents to ensure they are compliant and want to prevent fraud and money attempts, Dobson says they need to accept that documents are dead when it comes to ID checks.

“A digital solution scanning global databases and lists for sanctions and PEPs (politically exposed persons) is far quicker with individual checks being carried out in two seconds. It is more accurate, cost-effective and ensures compliance as it updates client details automatically,” he explains.

Dobson adds that the regulator, the Financial Conduct Authority, also has a part to play in raising awareness of the potential benefits of technology over manual methods of verification, otherwise many agencies could be facing serious penalties for failures to comply.

He conludes: “We are seeing record numbers of regulated businesses coming through our doors as they have seen for themselves over the past 12 months how inadequate the manual methods of verification have become.”