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ANTI-MONEY LAUNDERING

Anti-money laundering (AML) is always a high priority for the CLC and government alike. Russia's invasion of Ukraine has placed an even greater spotlight on it and the role of property in 'cleaning' dirty money. Your duties are laid out in

the Anti-Money Laundering and Combatting Terrorist Financing the Code and the Money Laundering Regulations 2017 (as amended). If practices fail to achieve compliance through work with the CLC, they may face disciplinary action.

The most common areas of non-compliance
60

60% of practices could not provide an AML training record for relevant staff.

55

55% had not updated their practice-wide risk assessment to account for changes imposed by Covid-19 restrictions.

50

50% had not updated their AML policy/ procedures following the introduction of the 5th Money Laundering Directive in January 2020.

45

45% did not demonstrate that adequate source of funds/wealth enquires were undertaken in relation to a transaction.

40

40% could not provide a sufficient matter risk assessment.

Key issues include:
Source of funds
and wealth

It is difficult to understand the source of funds without understanding the source of wealth - conveyancers should realise that these two concepts are not mutually exclusive. We would expect practices to investigate and satisfy themselves that the clients' reported income and wealth aligns with the documentation and information

they have provided. Information should be verified with evidence. The extent of the evidence required will vary. This is not a tick-box or cursory exercise and ongoing monitoring of risk is required throughout the duration of transactions.

Matter-based risk
assessments

CLC practices must have client- and matter-level risk assessments in place for every client and most matters. However, we find that conveyancers are often not undertaking assessments because they do

not perceive a transaction to be risky. This is not good enough. Also, it is not a one-time assessment - as a matter evolves, it may be necessary to revisit and adjust the assessment

Digital ID checks

We have been struck by the speed with which many CLC-regulated practices were able to adopt digital identity tools in 2020 as they responded to the demands of remote working. When used correctly, digital ID verification can provide a fast, cost-effective and reliable way to verify an individual's identity and reduce money

laundering and compliance risks. HM Land Registry will offer a 'safe harbour' to conveyancers using a digital identity method that complies with its digital ID standard, meaning it will not seek recourse against them, even if their client was not who they claimed to be.

China

In 2019, the National Crime Agency (NCA) issued a warning on Chinese underground banking. The warning was reiterated in the 2020 UK Risk Assessment. The NCA said evidence from successful money laundering prosecutions in the UK has shown that Chinese underground banking is abused for the purposes of laundering money derived from criminal offences. Chinese regulations provide an accessible,

legitimate and auditable mechanism for Chinese citizens to transfer funds overseas. Chinese citizens who choose not to use the legitimate route stipulated by the Chinese government frequently use a form of Informal Value Transfer System known as 'underground banking' instead. These are not funds that should be accepted for transactions or payment of fees.

Cryptocurrencies

Questions about payment by cryptocurrencies such as Bitcoin are becoming more frequent. We consider the AML approach to transactions funded by cryptoassets to be similar to that of cash purchases. We would therefore expect practices to adopt a risk-based approach

and complete enhanced due diligence due to the high-risk nature of the transaction. It is important that as much information as necessary is obtained in order to trace the funds and be satisfied that they are legitimate.

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