Jo Hodges, Sales and Marketing Director at Redbrick Solutions shares her thoughts with Today’s Conveyancer about the way the coronavirus pandemic has changed criminal behaviour.
It is estimated that organised crime costs the UK economy more than £37bn every year, and the National Crime Agency believes there are 4,500 organised crime groups operating in the UK. A series of webinars held by The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, have outlined changed criminal behaviour due to the Coronavirus pandemic. The webinars highlighted how normal criminal activity has been disrupted whilst at the same time introducing new opportunities as a result of the lockdowns.
The lack of travel opportunities and the closure of many cash rich businesses in the leisure sector has changed criminal behaviour with respect to money laundering. The lockdown has meant less paper cash being spent, so therefore, criminals have been finding new ways to use the cash that they have acquired from illegal activity, one way of doing this is to use cryptocurrencies. Criminals have been stockpiling cash and potentially could acquire or support businesses and individuals that are under financial strain and pressurise them into laundering money. Pushing cash through the accounts of vulnerable businesses or individuals who are struggling financially heightens the need for conveyancers to consider the source of funds. As the furlough scheme and other government support packages come to an end this threat will increase.
Solicitors and law firms are attractive to criminals because they process large amounts of money, are trusted and can make the transfer of money or assets appear legitimate. Most law firms work hard to prevent and to spot money laundering and take necessary action, but some get involved unknowingly. The volume of conveyancing transactions, and the significant amounts of money involved, mean that great care must be taken to spot suspicious activity.
The Government published the third National Risk Assessment of Money Laundering and Terrorist Financing (NRA) on 17 December 2020. It sets out the key risks facing the legal, accountancy, and finance sectors and updates the findings of the 2017 NRA. The money laundering regulations require conveyancers to take the NRA into account when drafting and updating practice-wide and matter-based risk assessments. The Legal Sector Affinity Group (LSAG), which includes all UK legal sector professional bodies and supervisors, has completed an extensive revision and redraft of its AML guidance and this was produced in January 2021. This replaces previous versions of the guidance and is published in draft pending approval by HMT.
HMRC has issued a record £23.8m worth of fines for organisations breaching and or ignoring money laundering regulations. Nick Sharp, Deputy Director of Economic Crime, Fraud Investigation Service at HMRC said: “Businesses who fail to comply with the money laundering regulations leave themselves, and the UK economy, open to attacks by criminals. “Money laundering is not a victimless crime. Criminals use laundered cash to fund serious organised crime, from drug importation to child sexual exploitation, human trafficking and even terrorism. “We’re here to help businesses protect themselves from those who would prey on their services. That includes taking action against the minority who fail to meet their legal obligations under the regulations as this record fine clearly shows.”
The Department for Digital, Culture, Media and Sport (DCMS) is creating a trust framework with standards for digital identity. The project, supported by the Law Society, CLC, SRA, CILEx Regulation, NAEAPropertymark, Guild of Property Professionals, RICS and National Trading Standard, is to create a centrally agreed framework, aligned to DCMS policy objectives and HMLR guidelines, against which all processes and providers would be accredited.
Law Society of England and Wales president David Greene said the society welcomes the efforts to “establish a reliable, secure and universal digital identity for consumers to use when looking to buy or sell a home”. “This will ease the burden on consumers having to produce information for ID checks with different parties and could help reduce fraud and reduce delays in the sales process – all beneficial developments for our members. The Covid-19 crisis has resulted in transformational technological change in the conveyancing market, and this represents another important step forward,” he said. In April 2021, the first output of the scheme is expected in form of a draft scheme, supported by a set of operation manuals the industry can adopt. The framework will determine what “good” identity verification looks like, allowing for reuse of digital identities across any schemes that comply with the rules.
It has been just over 1 year since the fifth Anti-money Laundering Directive was published in January 2020 and that year has seen a transformational change in ways of working for conveyancers and criminals alike. The new digital identity scheme will hopefully go some way toward combatting cyber fraud but the conveyancing industry must continue to work together to address the growing threat of money laundering.