Why is Anti Money Laundering Check So Important?
On October 28 2021, the National Crime Agency (NCA) announced that they had filed civil claims against a Chinese mother and two sons in the name of suspected money laundering, and successfully asked them to hand over a London property worth 1.6 million pounds for compensation.
National Crime Agency (NCA) is a law enforcement agency in the UK. This agency is the UK’s leading agency in combating criminal groups. It mainly combats organised crime and economic crime, including human trafficking, weapons and drugs, cybercrime, as well as economic crime across regional and international borders etc.
A woman named Mrs Hajiyeva was previously investigated by The National Crime Agency, they issued her an "Unidentified Wealth Order" (UWO) and asked her to explain and prove the source of her large amount of funds. The lady was unable to explain the legal source of her funds, thus, the National Crime Agency confiscated her luxury house in London.
What is the "Unidentified Wealth Order" (UWO)?
UWO refers to "Unexplained Wealth Order", which is a court order issued by a British court to enable the target person to disclose the unknown source of wealth. The relevant requirement for issuing an "unknown wealth order" is that the court must be convinced that there are reasonable grounds to suspect that the target person's known legal source of income is insufficient to enable him/her to obtain such a large amount of funds. After the National Crime Bureau and other law enforcement agencies successfully appeal to the High Court, the assets of people who fail to explain the source of their wealth may be seized and bank accounts may be frozen.
We have discussed in a previous article that many students’ bank accounts were frozen by the National Crime Agency or Police in the name of suspected money laundering due to private currency exchanges. Therefore, we once again remind students studying in the UK to use private currency exchange services carefully and not to be involved in money laundering investigations which could affect their studies. If you want to learn more about what to do if your bank account is frozen because of private exchange, you can click here to view the article.
What is Anti-Money Laundering Regulations (AML)?
Anti-money laundering legislation is a piece of legislation aimed at illegal money laundering. Money laundering refers to the illegal act of converting illegally obtained funds into legal funds or concealing the illegal source of funds. The purpose of the anti-money laundering law is to prevent money laundering activities that conceal and conceal the proceeds of crimes, such as drug crimes, organised crimes, terrorist activities, smuggling crimes, corruption and bribery crimes etc., through various means.
The process of money laundering usually includes the following 3 stages:
- Placement: Put "dirty money" into the legal financial system while hiding its source.
- Layering: This step is also known as "structuring". It hides the source of funds through a series of transactions and accounting techniques, and breaks down the funds into small transactions, making money laundering activities difficult to detect.
- Integration: After the laundered money becomes legal funds, it is withdrawn from legal accounts and real records, and then large-scale consumption, investment, etc are carried out.
In the United Kingdom, companies must abide by anti-money laundering laws. The anti-money laundering regulations in the United Kingdom stipulate that all industries that involve large amounts of capital must take a series of measures to prevent their businesses from being used for money laundering or terrorist financing purposes. For example, in the gaming industry, the UK government imposes very strict supervision. For casinos and online gambling platforms that do not have due diligence to investigate the source of customer's funds, the UK gaming regulator - the UK Gambling Commission will enforce penalties.
- In April 2020, the UK Gambling Commission (UKGC) imposed a fine of £13 million on Caesars Entertainment (now acquired by Silver Point Capital), which is the largest regulatory fine in the UK. Caesars Entertainment was punished on the grounds that it allowed a VIP registered as a high-risk gambler to place bets without investigating the source of funds, and lost £795,000. It also failed to investigate the source of funds for a lady who claimed to be a waiter and allowed her to bet £87,000. Additionally, allowed a customer to transfer £3.5 million through the casino without investigating the source and destination of funds, etc. In addition to being punished with huge fines, three senior managers of Caesars Entertainment in the UK also had their personal licenses revoked.
- March 2021, the British Gaming Corporation (UKGC) fined online casino and sports betting operator Casumo with a fine of 6 million to the Gaming Commission for anti-money laundering defaults in the United Kingdom. The casino operator must investigate the client's funds. And Casumo caused at least 5 customers to lose a huge amount of gambling money without investigating the source of customer funds.
In addition to the gambling industry, the real estate industry also involves a large amount of funds in every transaction. Therefore, the British government also urges real estate agencies and real estate transaction lawyers to check every client's funds. Especially funds from abroad, including those from areas with frequent and high-risk terrorist activities and areas with more serious bribery.
At present, the UK's anti-money laundering laws are becoming more and more stringent for financial service providers. For example, banks will always check the source of any large sum of funds in your account. If you plan to buy a house in the UK, we recommend that you prepare relevant documents and materials in advance and cooperate with a conveyancing solicitor for checking your source of funds. At the same time, we also recommend that you contact your bank manager in advance to avoid the bank from misunderstanding the large amount of money you have transferred for house purchases, which may cause your account to freeze.
If you have any questions about buying a house, investing in the UK and AML investigations, please contact us. Our team speak English, Mandarin, Cantonese, Korean, Russian, Portuguese, Spanish etc.
Key Stages of a Purchase Transaction for Individual Purchaser
The following is a general guide to the key stages of a conveyancing transaction for an individual purchaser when buying a property:
- Instructing a Solicitor and Client Due Diligence
Once you have instructed a solicitor to act, you should receive a Letter of Engagement, which includes details such as agreed fees and scope of work. Your solicitor will then ask for monies on account to cover the cost of search fees and other disbursements.
Your solicitor is required to carry out proof of identity checks in compliance with the Anti-Money Laundering Regulations and will obtain the following documentation from you:
- Proof of Identity: Original or certified copy of your passport or UK driving licence;
- Proof of Address: Original or certified copy of your bank statements or utility bills (within the past 3 months); and
- Proof of Funding: Original or certified copy of your bank statements (full copy) showing the funds required for your purchase have been deposited in your bank account for at least 3 months in a UK bank account or 6 months in an overseas bank account.
You will need to inform your solicitor if you have a related sale and/or require mortgage finance for the purchase.
If you are buying with the assistance of a mortgage, you will need to provide details of your solicitors to your lender so that they send a copy of your mortgage offer to your solicitors.
You will also need to inform the Estate Agent the details of the solicitors you have instructed so that they can issue a “Memorandum of Sale” to all parties.
Your solicitors will then write to the Seller’s solicitors to confirm instructions and request the draft Contract pack. For leasehold properties, your solicitors will also usually request the Seller’s solicitors to provide the Sales Management pack from the Landlord or the Managing Agent.
- Searches and enquiries
Once the draft Contract pack has been received, your solicitor will review the documentations and instigate the appropriate searches. Please note that the turnaround time for searches may sometimes take more than 10 days depending on the Local Authority.
Your solicitor will raise any enquiries if necessary.
Your solicitor will also discuss a potential completion date as soon as there are no outstanding enquiries.
- Pre-exchange
Your solicitor will prepare a report on title for you outlining the details of the property and drawing your attention to any issues or information you should be aware of.
If you wish to proceed, your solicitor will invite you to sign the Contract together with any other documentation and to transfer the deposit monies (usually 10% of the purchase price) in readiness for exchange of contracts.
Your solicitor will also advise that you to obtain quotations for building insurance for the property as you will take on the risk from exchange of contracts, unless stated otherwise. Please bear in mind this is usually a must for lenders.
- Exchange of contracts
Your solicitor will proceed to exchange contracts as soon as they have received your original signed Contract and deposit.
At this stage, you will become legally obliged to purchase the property and the agreed completion date will become final. In the event that you fail to complete on the completion date, you will be liable under the Contract to pay interest and expenses incurred by the Seller. You may even lose your deposit if the delay continues.
- Pre-completion
Prior to completion, your solicitor will prepare a completion statement calculated up to the completion date. It is recommended that you transfer the completion funds to your solicitor at least 1 business day before completion to avoid any delays which may affect your ability to complete on the completion date.
Your solicitor will carry out all the necessary pre-completion searches.
You should arrange a pre-completion visit with the Seller or Estate Agent to ensure that the property is in an acceptable condition. If there are any issues at this point, you should notify your solicitors as soon as possible.
If you are buying the property with mortgage finance, your solicitor will submit a Certificate of Title to request drawdown funds from your lender. However, please note that most lenders will require a minimum of 5 working days’ notice for drawdown requests.
- Completion
On the day of completion, your solicitor will remit the completion funds to the Seller’s solicitors before the contract time which can vary from 12.30pm to 2pm and the Seller’s solicitors will notify your solicitor upon receipt. The Seller’s solicitors will then confirm completion and inform the Seller and/or the Estate Agent to release the keys to your new property to you.
Your solicitor will advise you when completion has taken place so that you can collect keys at the designated place, which is usually with the estate agents.
- Post-completion
Following completion, your solicitor will deal with post-completion formalities which includes paying any Stamp Duty Land Tax and lodge an application to the Land Registry to register your interest in the property. Please bear in mind that the Land Registry may take at least a few months to register your ownership of the property.
If the property being purchased is Leasehold, your solicitor will serve a Notice of Assignment to your Landlord and/or Managing Agents to ensure that your details are updated. Where you are mortgaging the property, then the Landlord or Managing Agents will need to be notified by way of a Notice of Charge.
In most cases, you are required to pay the fees for receipted notices mentioned above and any other compliance fees.
Once the registration at the Land Registry has been completed, your solicitor will forward you the registered title confirming your ownership of the property. If you purchased with assistance of a mortgage, your solicitor would send a copy of the registered title to your lender evidencing that their charge has been registered.