Flagged for an AML audit as a homebuyer? Here’s why and what to do about it

A property purchase is a convenient way to process the spoils of illegal endeavours, making anti-money laundering checks necessary within the UK property sector. Of course, not everyone flagged for an AML check is deemed guilty of money laundering, yet it can still be an uncomfortable occurrence for innocent homebuyers.

To help iron out the details in the case you are subject to an AML check, Credas Technologies, the anti-money laundering technology platform, has outlined why you may have been flagged, and what steps to follow.

Money laundering, explained

Money laundering is the process of turning large amounts of ‘dirty money’ – earned through criminal activity – into ‘clean money’, which has the appearance if coming from a legitimate source and cannot be traced back to any illegal actions. This is accomplished by feeding dirty money through a legitimate business and a busy housing market where homes are easily and quickly purchased and sold, making it the ideal cleansing mechanism for launderers.

Tim Barnett, chief executive officer of Credas Technologies, said: “The housing market is exceptionally busy at the moment and so the need to be particularly vigilant of money laundering has never been greater.”

“For legitimate buyers, being flagged for an AML check may come as a cause for concern which is only natural, but there is really nothing to worry about.”

“HMRC has been tightening the noose around property market money launderers over recent years which means agents have to go to great lengths to ensure no illegal activity is occurring, otherwise they face hefty financial penalties.”

“Much like the wider process of purchasing a home, the best approach is to have all your documentation in order so if you do have to undergo an AML check, it can be completed swiftly and you can proceed with your purchase”, he concluded.

Red flag: Cash-only buyer

The first warning sign is a cash-only buyer. To sellers, this can be an attractive premise, promising a quick transaction unfettered by the complexities of a mortgage. However, while being a cash buyer puts you in a strong position within the market, it also increases the odds of coming under a greater degree of AML scrutiny.

Therefore, it is vital that you can prove where and how you’ve accumulated the cash and, if it’s legitimate, there should be some kind of paper trail that allows you to do this which will be the most optimal way to alleviate any concerns from an AML standpoint.

Red flag: Incorrect documentation

You should also ensure that you have your documents in order and avoid any silly mistakes. Criminals who are attempting to exploit the housing market will often go out of their way to avoid providing important documents or vital pieces of information, specifically those that are used to prove I.D or financial history.

One of the most common oversights is failing to update your documentation from your maiden name when getting married, or with your current address after originally moving.

As a buyer or seller, you can find yourself under undue suspicion if you fail to provide the right information in a timely fashion. Often, this will be a result of an oversight or a silly mistake, so it’s crucial to ensure the utmost attention to detail throughout the buying/selling process and have all your required documentation at hand.

Red flag: being unable to answer ownership questions

A common warning sign for money laundering is short-term ownership. Criminals who use the market to clean their money do not want to hold on to property for long periods of time and a tell-tale pattern of AML is buying and selling homes at a high turnover.

That’s why, if you’re selling after only owning for a short while, then you need to be able to explain the reason why. Even when you can explain why it might be wise to avoid selling too quickly since many lending institutions will not finance the purchase of properties where the current ownership has lasted less than six months.

Red flag: Overseas buyers

Buyers from overseas often carry a higher level of laundering risk for UK sellers, which is why foreign buyers require additional checks and due diligence.

Therefore, if you’re selling to a buyer outside of the country then you’ll need to be extra patient.

On the other hand, if you’re an overseas buyer then you’ll also need to be patient, but if you have all the necessary documentation available from the beginning, the process will be greatly expedited.