Mortgage industry urged to increase vigilance over suspicious activity

Brokers have been warned to be on their guard against money laundering as the government launches a clampdown on the property industry.

So far, estate agents have been the prime target for the government’s action in this area, as officers from HM Revenue & Customs visited 50 firms suspected of trading without the proper registrations under money laundering rules.

Countrywide was fined £215,000 for failing to ensure adequate controls at group level, and for failures in due diligence, verification and proper record-keeping. It says it has invested in systems training and taken on additional staff to improve checks and comply with regulations.

While mortgage brokers are not required to sign up for anti-money laundering supervision by regulators in the same way as lenders, solicitors and estate agents, they still need systems and controls to prevent financial crime. The Financial Conduct Authority warns in guidance to brokers that without processes for reporting suspicious activity, advisers may be at risk of committing money laundering offences, or falling foul of the Proceeds of Crime Act 2002.

It says: “Therefore, many mortgage and insurance brokers choose to implement controls like those adopted by firms subject to the money laundering regulations and our AML rules.”

LexisNexis Risk Solutions director of financial crime compliance and reputation Michael Harris says brokers should be prepared for more regulatory action. He adds: “Estate agents are being clobbered at the moment and law firms are under the microscope, so those are two of the several actors that are important in the house-buying process. Inevitably, brokers are going to come under the spotlight and I have no doubt that the regulatory authorities will be taking a keen interest in that element of acquiring a property.”

Mortgage networks and clubs are increasingly looking at technology to help advisers verify their customers’ identities electronically. Primis, The Mortgage Alliance and the NACFB have all partnered with SmartSearch for these checks. SmartSearch senior account manager Jo Wall says: “One of the main threats is the use of forged passports and driving licences that are undetectable with the naked eye.

“It can be very difficult for firms to adequately protect themselves and remain compliant, particularly smaller firms who simply do not have the resources.”

TransUnion managing director of fraud and identity John Cannon says mortgage advisers should assume the authorities are already looking at the sector.

He says: “Under the AML regulations, there is always a need to verify the identity of the person you are dealing with and some burden in terms of making sure that is not someone who is known to be a risk, and where those funds are coming from. If there is any suspicion over that, you should be stepping up checks and ultimately submitting a suspicious activity report.”