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Loophole Meaning Developers Don’t Have to Run AML Checks is ‘Opening the Gates’ for Criminals

Anti-money laundering experts SmartSearch says the ‘anomaly’ where developers selling homes on their own sites do not have to be registered for anti-money laundering purposes whilst estate agent selling the same homes must is ‘opening the gates’ for criminals.

It was reported on Monday that while estate agents must be registered for anti-money-laundering purposes, developers who set up their own staffed sales offices on sites do not.

“The technology to catch the launderers is out there, but if businesses are not obliged to undertake AML checks, they won’t.”

The anomaly has emerged because developers are regarded as peer to peer or private sellers, which means, despite the fact they are selling properties on a commercial basis, they have no responsibilities when it comes to checking the identity of the buyer for AML purposes.

Martin Cheek, MD of AML experts SmartSearch, who work with 1000s of estate agents to ensure they are compliant said: 

“Whilst developers may not meet the definition of an estate agent under S.1 of the Estate Agency Act 1979, they are still without doubt selling property on a commercial basis so should, therefore, be following the money laundering regulations.

By not requiring developers to be AML registered, we are opening the gates for money launderers. 

The UK property sector is already one of the biggest targets for money launderers; loopholes like this make it even more vulnerable.”

SmartSearch believes the law needs to change to ensure any businesses vulnerable to money laundering – such as property developers – come under the regulations.

And the issue is not just about developers. Any individual or business that owns property can sell it onto another individual or organisation and not have to worry about AML regulations either, as Martin explains:

Martin Cheek

“Individual sales are another way money launderers can exploit the system. For example, a foreign company owns a multi-million-pound house in Knightsbridge. It looks legitimate, but the company is ultimately owned by a corrupt politician. Under current rules, that corrupt individual can just sell the company, as a whole, to another corrupt individual. In this situation, no Know Your Customer (KYC) checks are undertaken, and as far as the law is concerned, the transaction is perfectly fine.

SmartSearch believes the law needs to change to ensure any businesses vulnerable to money laundering – such as property developers – come under the regulations.

“If we do not bring all property sales into the regulations, we are giving criminals an easy ride, “ he said. “Conducting AML checks does not need to be cumbersome. Electronic platforms are the most reliable, secure and efficient source of information for identity solutions and can perform AML checks in a matter of seconds.”

He concludes: “The technology to catch the launderers is out there, but if businesses are not obliged to undertake AML checks, they won’t.”

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