To my shame I was a recent victim of a scam. In May I had contacted my bank as I could not use my debit card. I was told that there was suspected fraudulent activity on my account and my card had been stopped. I duly received a new card. About 2 weeks later I was contacted on my mobile phone by “my bank” who said they had noticed some further fraudulent activity on my account. I was instantly sucked in because of my earlier experience and because the lady on the telephone was very polite and sounded very helpful. After what seemed like 5 minutes of talking to the lady I started to think “this is not right”. I did not immediately end the call as I did not want to upset the nice polite lady. I carried on talking for another 2 or 3 minutes and then ended the call. I immediately phoned my bank on a land line only to find out of course that it was not the bank who had called. In the short time of the call someone had applied for a £20,000 loan on my account. I felt very silly. Always be vigilant.
Money laundering is something that can affect us all. In 2019 the Law Commission reported that money laundering cost every household in the UK £255 per year.
Money laundering is a process used by criminals to make it look like the money they have in their possession has been legitimately earned. What they are doing is taking “dirty money” earned from criminal activities and “cleaning” it. It typically involves transferring the money through foreign banks or legitimate businesses in such a way that the money appears to have been obtained through legal means. Money laundering aims to erase the connection between the money and the criminal activities. Criminal activities such as drug trafficking, human trafficking, terrorism, illegal arms sales, extortion and bribery, fraud, corruption, tax evasion, modern slavery, and drug dealing.
Organisations including solicitors must therefore in every instance verify the identity of their client, obtain proof of their address, understand the nature of the work they are being asked to carry out, know the source of funds for the work they are being asked to carry out and in some instances the source of a client’s wealth.
Source of funds and source of wealth are two different things. Source of funds is the origin of the monies for the particular transaction or work. Source of wealth is looking more broadly at the assets of the parties involved in a transaction. Examples of the source of funds include savings, salary, bonuses, inheritance, divorce settlement, the sale of a property and gifts. These can be verified by looking at bank statements, tax returns, investment certificates, contracts of employment, copy probate and wills, and copy completion statements. It is important that we keep records so that we can satisfy any organisation who needs to receive this information as to the source of funds.
Unfortunately, money laundering in property transactions is a very real threat. Criminals see property purchase as the way to incorporate their “dirty money” into the legitimate economy. This can be carried out through a variety of means.
In 2023 the Serious Fraud Office (SFO) secured the criminal conviction of William Osmond a solicitor who tipped off his client about a £4 million investment he had made in a Mayfair property that was being investigated by the SFO.
In 2021 the Solicitors Regulation Authority fined a solicitor’s firm £9,000 for accepting over £500,000 into its client account from third parties unconnected with a particular property transaction who did not reside in the UK. The solicitor could not provide any explanation or evidence of the source of funds. The funds may well have been legitimate but the solicitor should have checked.
Money laundering affects us all. Always be vigilant.
