Money Moves: The consistent threat of money laundering in the property industry

Money laundering makes the criminal underworld go round. In the same way legitimate businesses can’t function without financial infrastructure (think banks, insurance, and regulations), criminals and the illicit business networks they belong to can’t legitimise their money. 

The property industry has always been plagued and abused by financial crime and money laundering. Simply put, money laundering is a term to describe how illegally obtained funds are hidden or made to appear legitimate through the use of real estate. A concerning statistic is that 41% of criminal networks, use property transactions to launder their illicit proceeds (Europol). This method provides a veil of legitimacy used to cover for their activities, making detection and prevention difficult.

Laundering money goes beyond shady financial and property transactions. To understand the relationship between money laundering and it’s impact on society and innocent individuals, it is important to recognise the nature of the crimes which lead to the acquisition of the dirty money. According to Europol, in a study conducted on Europe’s most threatening criminal networks, 82% focus on one primary activity such as drug trafficking or organised property crime. The remaining 18% operate as a poly-crime networks and are involved in multiple sectors of illegal activity which can include human trafficking, fraud and migrant smuggling. Dirty money is more than “white collar crime” with 68% of these criminal networks using violence as part of their practices. 

An alarming 34% of the most dangerous criminal networks have remained active for over a decade, demonstrating formidable resilience and adaptability. For the individuals within these organisations, engaging in criminal activities isn't merely a game or a fleeting endeavour; it represents a long-term commitment, a career choice that they've pursued with tenacity and dedication. This grim reality underscores the seriousness and complexity of the issue at hand, requiring sustained and effective efforts by everyone working within the property industry to be proactive and when needed, to fight back.

Opportunities to stop money laundering

Despite criminals continually adapting to changing markets and opportunities, there are signs to look for which can alert you to possible money laundering.

• Unusual, secretive or evasive clients

• Unexplained changes in legal advisers

• Outside your firm’s typical area of expertise

• The client is not local to you and there is no reasonable explanation as to why your firm has been chosen

• Unexplained urgency, requests for shortcuts or changes to the transaction particularly at the eleventh hour

• Unusual level of knowledge about money laundering processes

• Unusual size, nature, frequency or manner of transaction

• Individual appears unconcerned or lacking knowledge about the transaction

• Unusual or unexplained source of funds

• Unusual or unexplained alignment of wealth and funds or account activity

• Unexplained payments or involvement from a third party

• Unexplained connections, activities and/or movement between jurisdictions

• Consideration should be given to high-risk areas of work, sectors, jurisdictions and business activities

Addressing Red Flags

When you encounter a potential red flag, the initial step is to delve into independent research or request more information from the client.

The way your client responds and the information you uncover can help you gauge whether the red flag is indeed a sign of money laundering, or if additional insights and discussions can alleviate your concerns.

Remember to keep track of your inquiries and the responses received. It's equally crucial to note down any research steps undertaken, the corresponding findings, and any supporting material.

Maintaining a record of these steps and preserving evidence could prove valuable should any questions about the client relationship or transaction arise in the future from your supervisor or law enforcement.

Mitigating money laundering risks

To minimise your exposure to money laundering risks and safeguard against potential regulatory or legal implications, consider these critical measures:

• Be vigilant for red flags

• Always be curious

• Keep a meticulous record

• Adhere to your firm’s internal reporting protocols

Regulated firms have an essential role to play in combating economic crime. They act as gatekeepers and have a responsibility to help law enforcement agencies identify potential money launderers. This can be achieved by implementing rigorous checks and procedures to detect and report any suspicious activities. Ultimately, this contributes to a safer, more secure, and prosperous society for everyone to live in, including ourselves, our families and our friends.