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Developers at risk from money laundering ‘loophole’

  • 15/08/2019
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Developers at risk from money laundering ‘loophole’
Tech firm SmartSearch has suggested an anomaly in the anti-money laundering (AML) regulations regarding property developers is presenting an opportunity for criminals to cash in.


While estate agents must be registered for AML purposes, developers who set up staffed sales offices on sites do not.

This means that they have no responsibility for checking the veracity of a buyer’s apparent identity for AML purposes.

Martin Cheek, managing director of SmartSearch, said that while developers may not meet the definition of an estate agent under the Estate Agency Act, they are still selling property on a commercial basis and so should have to follow the same regulations.

He continued: “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.”


Wider property market risk

Cheek suggested that this problem stretches beyond developers too, with any individual or business that owns property able to sell it without having to worry about AML regulations either.

He explained: “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.”

Cheek called for the law to be amended so that any business vulnerable to potential money laundering be brought under the regulations, warning that failing to do so meant “giving criminals an easy ride”.

He concluded: “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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