Earning such titles is nothing to be proud of. With the very human cost of money laundering in the form of drug wars, human trafficking and more, the UK needs to take an aggressive and strategic approach to reduce financial crime. But current practice is falling way behind where it needs to be.
Research into financial crime and real estate has discovered nearly half (43%) of property professionals are not improving their anti-money laundering (AML) processes because they either don’t care or don’t think they will get fined. It’s a profound statement. This is joined by the admission that over a third (36%) haven’t reviewed the sanction list in the last month.
On a more positive note, a noteworthy 82% of real estate professionals say money laundering has become a greater focus in 2022 and 60% are looking to increase budgets for emerging AML tech in 2023 to avoid AML non-compliance fines.
So, the intentions are there. But how can the real estate sector actively begin to crack down on dirty money?
Implement emerging AML technology
Even when you’re aligned with AML rules, it can often be a tricky task to stay in line with changing compliance regulations while simultaneously trying to run a busy real estate business.
This statement is backed up by 59% of respondents in the survey admitting they are not completely confident in their AML procedures. And so, to become more compliant, over three-quarters (78%) are now implementing technology. But how exactly does technology help? Having a coherent system of collecting, managing and accessing documentation makes all the difference. Ineffective systems with a lack of proper customer due diligence (CDD) can form easy pathways for money laundering activity to slip through.
Leveraging an AML platform that can digitise compliance enables you to have items such as customer records, details and transaction data all stored in a central and easily accessible location. This gives employees across the business the ability to check new customer identity documentation, set alerts for suspicious activity and send information to auditors.
Not only is admin time massively reduced, but the process is intrinsically tied to UK AML requirements. In the fast-paced world of real estate, these margins could make all the difference.
Educate within real estate and harness a culture of compliance
Technology needs to be joined by employee awareness. There’s no point in implementing technology without having the education and training on AML practice to go with it. It’s telling that when asked ‘what they believed was the weakest part of their AML process’, the most selected answer by the property professionals surveyed was ‘training staff on the latest regulations’ (29%).
One of the key aspects of training and encouraging a culture of compliance is through explaining red flag behaviour. If you don’t know what you’re looking for, it can be hard to spot. In real estate terms specifically, this could involve flagging actions such as third-party involvement - when someone other than the buyer deals with most of the purchase - an irregular sale price - when the purchase price is much higher or lower than anticipated - and, of course, large cash transactions for deposits and other fees.
It doesn’t always equate to malpractice, but such activity should immediately be flagged as an alert by employees to look into the potential ‘issue’ further. With this training, and awareness of AML regulations and technology to facilitate such processes, you can then prioritise ethical onboarding.
Broaden the scope of what ESG is
Every action a business takes can have a potential ESG consequence. The nature of Russian money laundering in London showcases how chains of reaction can link back to a whole range of wider illicit and criminal activity. Real estate companies and their employees should view onboarding prospects, first and foremost, as an ethical practice.
Turning a blind eye or not caring about fines is going against a moral duty to call out such practices. ESG is more than just a set of values a business lists out - it’s an influence on everything the organisation does and how it operates. It’s contagious, and with this influence comes greater awareness, compliance and ethical practice.
Robust measures to bust out money laundering
Russia’s war has shone an exposing and overdue spotlight on the nature of real estate in London and the UK, creating an urgent need for the real estate sector to review its money laundering and compliance policies. By adopting the right AML software, implementing employee training and developing a culture of compliance, companies can create robust measures to bust out money laundering activity.
But despite positive intent from the real estate sector to focus on AML in 2023, the impending recession has again put this response up in the air, with 42% of those surveyed considering cutting compliance budgets. The research revealed maximising profitability was ranked as the highest business priority while protecting reputation was identified as the lowest.
This of course goes directly against ESG and moral principles real estate needs to be aligned to - reputational damage will only serve to inhibit professionals and organisations in the long term. Now is the time to uphold such values above all else.
