Money laundering is a crime and involves dealing with the proceeds of crime in such a way as to ‘clean’ the funds to make them seem as though they have come from a legitimate source. Residential property transactions are subject to the Money Laundering Regulations 2007 (MLR) and the Proceeds of Crime Act 2002. Money that funds terrorism is also covered by the Regulations, whatever its source.
A variety of organisations must comply with the MLR. These include banks, casinos, estate agents, bureaux de change and accountancy practitioners. Solicitors are also significantly exposed to the risk of being used for money laundering activities and are required to carry out certain checks in order to comply with the law. The Solicitors Regulation Authority is responsible for overseeing compliance with the MLR as they apply to the legal profession.
If you are buying or selling residential property, it is important to be aware that your solicitor must comply with the MLR. Solicitors have a duty to be alert to suspicious transactions, not only with regard to the source of the funds used to purchase a property but also to property being sold that has been funded by the proceeds of crime. However, the vast majority of property transactions do not give rise to problems.
What This Means for You
In order to comply with the MLR, your solicitor will ask you to confirm your identity. This means that you will need to provide your passport or a driving licence with a photograph as well as proof of your address, such as a utility bill or other similar document addressed to you at your current home. Copies of these documents will be taken and these must then be certified as being true copies of the originals by a person who is subject to the MLR and confirmation given that the picture is a true likeness.
If you do not provide these documents, it will usually impede the progress of your transaction, which could mean a delay in the receipt of money being paid to you or a property purchase being postponed.
Confidentiality
Solicitors have a duty of confidentiality that extends to all their clients. In some circumstances, however, the law imposes a higher duty on solicitors, which may mean that the duty of client confidentiality is compromised. A breach of the MLR is such a higher duty.
Rest assured that all personal information is kept confidential unless the solicitor believes or has reason to suspect that money laundering is involved. If a solicitor has reasonable grounds for suspecting a breach of the MLR, they have an absolute duty to report the transaction, and the individuals involved, to the Serious Organised Crime Agency (SOCA) immediately.
Although the solicitor’s suspicion must be ‘reasonable’, it may become apparent at a later stage that the transaction was in fact entirely innocent. However, failure to report suspicious activity carries severe penalties for solicitors, such as unlimited fines or imprisonment.
Tipping Off
A solicitor who reports a client to the SOCA is unable to tell the client that they have done so. This is because informing the client constitutes a ‘tipping off’ offence, for which the solicitor could be imprisoned.