Money laundering

One of the biggest problems facing residential convey-ancing is ensuring that your transaction does not fall foul of the Money Laundering Regulations 2003. The regulations demand that we make reasonable enquiries as to the source of funds in a conveyancing transaction to ensure that they are not considered proceeds of crime.

While attending a recent workshop on the subject it became clear that each firm's procedures when dealing with money laundering vary quite widely. One money laundering officer went so far as to suggest that accepting a transfer of funds from a bank was acceptable as the bank has its own checks and procedures so the money must be clean by the time it reaches the firm's account. In my view, this is totally wrong.

The reason why this is wrong is that a bank will accept money into their account and even transfer it on while in the background they may have reported it to the Serious Organised Crime Agency (SOCA). Therefore, the money when it reaches your firm's account may still be 'dirty' and also the subject of an investigation. To use this money may then be considered an offence to which you may be a party if you have not complied with your obligations.

So, we, as conveyancers, have to make reasonable checks as to the source of all monies as there is no limit as to what is considered to be proceeds of crime. But your firm may be willing to take a certain amount of risk as the sums of money are reduced. Therefore, accepting £200-£400 on account of costs for searches may not necessarily warrant investigation, but this will depend on how risk averse your firm is.

In recent times we have seen an increase of funding coming from the 'bank of mum and dad' and this presents its own problems when dealing with money laundering. In one case I was acting for a man whose father was 'gifting' him £100,000. The money was already in the son's bank account and I asked for a copy of the bank statement showing this from the son. This was produced. However, when I asked to see a bank statement from the father's account to link up the transfer of funds, I hit a brick wall. The father refused to give me the information despite several assurances that it was for our own information only and subject to confidentiality.

The father argued that to ask for his statement was going too far and unreasonable under the regulations. Of course, I brought this to the attention of the firm's money laundering officer who agreed with me that he 'protested too much' and a report to SOCA was made. The son eventually took his business elsewhere as I refused to act any further until I knew where his funds had come from.

But what if I had received the father's statement and that showed that the £100,000 came from another account? Do I then ask for more information and perhaps another bank statement? Just how far do we go?

There doesn't seem to be any definitive answer on this, only that we make reasonable enquiries. For me, it comes down to you as the conveyancer knowing your client and asking the right questions at the start of the transaction: how are you funding the transaction, where is the money coming from and can you provide evidence? If the answers are sketchy or tenuous then maybe there is more than meets the eye.

Don't worry about offending the client because, in my experience, if they have nothing to hide then they don't mind you asking the questions and for the evidence.

Be vigilant because at the end of the day it is not just the firm that will suffer, it is you '“ personally. How far is too far? In my opinion there is no 'too far'.

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