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Concerns increase as the headlines report the rise and rise of money laundering within the professions

50 estate agents across England found themselves enduring an unannounced inspection as part of a week-long campaign to tackle suspected money laundering in the property industry.

HMRC suspected the agents involved of trading without the registrations required by the UK’s money laundering regulations.  That failure to comply has already led to agents being fined heavily, most notably in the case of national agency Countrywide who received a £215,000 fine.  These fines will now be followed by even more stringent action by HMRC, action that is likely to involve criminal proceedings in many cases.

During the visits HMRC inspectors questioned the agents to establish whether they were in breach of the regulations so they could then assess what further action, if any, would need to be taken.

While this may look like heavy-handed, HMRC were quick to point out that they are responsible for ensuring the UK’s 11,000 residential and commercial estate agents are doing everything they need to do in order to protect themselves from criminals using property sales to launder money or even finance terrorism.

With that in mind Simon York, Director of HMRC’s Fraud Investigation Service, quickly went on record after the visits to underline HMRC’s position:

“Estate agents need to understand that criminals prey on weaknesses, so it’s vital they take all steps to protect themselves. The money laundering regulations are key to that, but there’s still a minority of agents who ignore their legal obligations. These inspections are a wake-up call that if you continue to trade illegally we will come knocking.”

However, it is not only estate agents that are under scrutiny at the moment.

The Home Office and HMRC are also looking closely at the capital markets (any market used to raise or trade finance, derivatives, currencies and/or commodities) who they class as also being at risk of being drawn into money laundering. 

The case of Deutsche Bank tends to support this view.  In January 2017 Deutsche Bank was given the largest fine ever imposed in the UK for failing to comply to money laundering regulations by allowing a Moscow-based customer to convert at least $6 billion of roubles into US dollars using ‘mirror trades’ before transferring those funds to offshore accounts in countries such as Cyprus, Estonia and Latvia.

Given London is arguably the world’s leading capital trading hub, these scandals have the potential to be massively damaging; they question the integrity and safety of trading in the UK and could force other financial instructions to move their trading efforts to the US or Asia.

However, it is not an easy nut to crack.  Because of the way they operate, the capital markets provide vehicle the ideal to hide the proceeds of crime in amongst legitimate assets whilst offering the opportunity to use what you accumulate to generate even more.   In addition the intangible nature of how that wealth will manifest itself – for example a tax-haven-domiciled exotic derivative - are much harder for law enforcement or governmental agencies to spot and, therefore, to act against.

And banking has also been scandalised by money laundering. 

Only this week Peter O’Higgins, CFO of challenger bank Revolut has been forced to resign following a report in The Daily Telegraph claimed Revolut switched off an anti-money laundering system that flags suspect transactions to allow it to promote ‘false positives’.  Although Revolut has denied the claims (and Mr O’Higgins made no mention of it in his resignation statement), The Telegraph are confident they can show their system was inactive between July and September 2018, a gap which they allege allowed illegal transactions to take place on their platform. 

And this isn’t the only insinuation Revolut have been forced to endure recently.  Tech magazine Wired reported they had been investigating allegations around their “challenging workplace culture” and high rates of employee churn.

The cumulative effect of these claims and Mr O’Higgins resignation has likely contributed to Revolut’s failure to realise their expansion plans in the US, Singapore and Japan.

Although these are 3 very different cases involving very different markets, the one thing they have in common – and the one thing that concerns us most – is that they all set out very clearly just how vulnerable some of the traditional professions are to being used for money laundering.  By extension, if these highly reputable and highly regulated professions are at risk, what does that mean for you and your business? 

If you are involved in activities that involve the trading or exchange of any type of asset – particularly within a digital or online environment – you may at risk of being taken advantage of by this new breed of criminal that has identified the professional environment as an easy way of safely laundering the proceeds of their crimes. 

If you either feel your business may be at risk from money laundering or if it’s been alleged your have been involved in money laundering and you want to know what to do to defend your livelihood and safeguard your reputation, please call us today on 0207 792 5649 or email us at info@selachii.com

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