Money Laundering Checks

by Mark Johnston

It is a sad fact that in more recent time’s global terrorism and crime has had an effect on our daily life. From having our banks accounts plundered by lowlifes to more stringent checks at the airport, we can not escape we are all at risk.

Data has shown that a large amount of money is laundered through the property market every year. This has, inevitably, had an effect on the way property is bought and sold.

Providers of financial services are required by law to check whether their client is on the UK treasury’s “sanctions list” because of money laundering activity and all firms are forbidden from doing business with any individuals on the list.

Money laundering checks are to make sure that borrowers are who they say they are and they require the borrower to produce passports, driving licences etc. to do so.

According to the dictionary of Finance and Banking, money laundering is defined as a process where money is acquired illegally either through theft, drug dealing etc. and is put through a cycle of transactions so it is ‘cleaned’ and will appear to have come from a legitimate source. Therefore, money laundering does not take a singular act but takes a more complex operation.

The basis aim for money laundering checks is to prevent ‘ill gotten gains’ getting in to the banking system. This particular type of fraud has significant effects on the consumers, the banks and the government.

Money laundering is a global trend and increasingly recognised in recent times. The legislation of money laundering in the UK is governed by 4 acts of legislation which are:

–          The Terrorism act 2000

–          The Anti-Terrorism Crime and Security Act 2001

–          The proceeds of Crime Act 2002

–          Serious Organised Crime and Police Act 2005

The money laundering regulation (2007) has important requirements that all lenders should follow which are:

–          the training of staff

–          the checking of the identity of clients

–          the maintenance of records

–          the establishment of reporting procedures

Failure to comply under this regulation is a criminal offence and can be prosecuted by the Financial Service Authority (FSA) and the crown Prosecution Service (CPS).

The Financial Service Authority (FSA) is the principal regulatory agency that supervises the market in which money laundering takes place. Its main objects are covering market confidence, public awareness, consumer protection and the reduction of financial crime.

Research has shown that criminals will usually exploit weaknesses in lending and conveyancing systems to gain illegitimate financial advantage from the UK property market. Fraudsters will try to limit scrutiny of their identity and the transaction.

Mortgage lenders often rely on other professionals to verify the legitimacy of transactions and safeguard their interest and therefore lenders may not extensively verify information they receive, especially in a rising market.

This is why recently the government is beginning to lose patience’s with broker firms that flout legislation requiring them to check clients.

Chris Clare, director at Sanctionssearch said “up to now compliance has been patchy”.

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