How to conduct AML checks on corporate clients as part of a property transaction

Understand your reporting obligations

Familiarise yourself with your reporting obligations under the AML regulations, including when and how to report suspicious activity or transactions involving corporate clients to the appropriate authorities, such as the National Crime Agency (NCA). The NCA provides helpful guidance on when and how to submit a Suspicious Activity Report.

Develop clear processes, internal controls and policies

You need to develop a comprehensive Client Due Diligence (CDD) process for corporate clients that encompasses all necessary steps to verify identity, assess risk, and monitor ongoing transactions. Ensure consistency in applying CDD procedures across all client relationships and document the rationale behind risk assessments and decisions. We’ll share more on what those processes might include further on.

Once you have developed your controls and policies you should regularly review and update these based on any changes to regulatory requirements, industry guidance as well as any changes to the types of clients you are commonly working with.

Part of your processes should include how you are going to maintain detailed records of all AML checks conducted on corporate clients, including documentation of identity verification, beneficial ownership information, transaction records, any escalations that were required and any suspicious activity reports filed.

Ensuring your teams are aware of these processes and they are bought into why they are important to follow

You need to provide comprehensive, ongoing, training to staff members on identifying, verifying and reporting suspicious activity related to corporate clients. Keep employees informed of evolving AML risks and regulations through regular training sessions, updates, and communication channels. And remember, the best way to get buy-in from staff to follow what they’ve learnt in their training is to bring this to life using real life stories and examples. Good sources for these stories include:

• The National Crime Agency.

• Serious Fraud Office.

• SRA case studies.

• Reliable media outlets.

Establishing who your client really is

It is essential to know the real person, or people behind a corporate entity, even if they are purchasing a property through it. This information should be obtained as soon as possible in the transaction, as the person you are dealing with may not be the ultimate beneficiary of the transaction. To identify the ultimate beneficial owners (UBOs) of the corporate client, you must examine the ownership structure(s) of the business. There are various ways to achieve this, such as studying company registers, shareholder agreements, and ownership declarations to determine beneficial ownership. You may also ask the person you are dealing with to provide this information, or obtain it from commercial registers. However, it is important to keep in mind that the Persons of Significant Control register on Companies House should not be solely relied upon.

If you are looking to reduce the time it takes to gather this information, you may use a provider like Thirdfort who can access multiple datapoints in seconds and turn this raw data into an easy to read report. You will still need to properly scrutinise the report, but this can give you a head start over other agents who may be spending their time trawling through various layers of ownership via a commercial register.

Verify the identity of owners and directors

Once you have identified who your client really is, you will need to verify their identity. When dealing with a corporate entity this can be even more difficult than a typical residential property transaction because the owners may not live locally, you may not be dealing with them directly and you may never get the chance to meet them in person. All of this increases the risk of fraud, so it is even more important that you have robust measures in place to do so. Running a basic AML screening is not enough to mitigate the risks.

What can you do?

Using a certified ID service provider like Thirdfort you can remotely verify the identity and address of owners and directors globally without relying on certified copies of documents. It’s worth noting that not all remote identity verification providers are created equally. Here are some considerations that can help you distinguish between providers:

• Do the checks the provider is carrying out meet HM Land Registry’s Digital ID Standard?

• Do checks include AML screening? And does this screening cover fitness and probity as well as regulatory warnings alongside the more standard Politically Exposed Persons (PEPs) and sanctions screening?

• Can you use the tool to monitor your client for any changes to their status throughout the course of the transaction?

• Are checks easy and convenient for clients to complete? It can be helpful to check ID service providers Trustpilot reviews.

• Does the ID service provider offer support for you as well as your clients? And how prompt are responses? Have you tried contacting the provider’s support team, without warning, to check this?

You also need to identify any other risk factors in relation to your client. Again, an ID service provider can help. Some flags to look out for include:

• PEPs.

• Sanctioned owners or directors.

• Whether the client lives in a High-risk jurisdiction.

• Physical cash intensive sectors.

As much as these types of checks protects you as a business, using an ID service provider is also convenient, fast and simple for your clients. However, many owners and directors are required to verify their ID multiple times a year, creating needless duplication of checks. With Thirdfort, ID and AML reports can be shared between regulated firms in a GDPR-compliant way, using Secure share. That means that your client’s accountant, wealth manager or solicitor could share reports that have already been completed with you. Improving the client experience and removing delays.

Understanding the nature of the transaction

Conduct thorough due diligence to understand the purpose of the transaction and ensure it aligns with the stated business activities of the corporate client. For example, if a property purchase is ostensibly for investment purposes but the client's primary business is unrelated to real estate, further investigation may be warranted. The question you should always be looking to answer is “does this make sense?”