At Credas, we work closely with estate agents, conveyancers and other property professionals to help you meet your anti-money laundering (AML) obligations with confidence.
As the UK property market continues to attract overseas buyers and internationally sourced funds, due diligence needs to be tighter and more thorough than ever before. Cross-border transactions carry higher risk, and regulators expect that risk to be managed properly.
International transactions often involve:
- Funds moving across multiple jurisdictions
- Different regulatory standards
- Complex corporate or trust structures
- Currency exchanges and layered banking arrangements
- Politically Exposed Persons (PEPs) or high-risk third countries
These factors increase the difficulty of verifying identity, understanding the true source of wealth, and confirming the legitimacy of funds.
The National Crime Agency has repeatedly highlighted that UK property remains a target for illicit overseas funds. In response, regulators expect firms involved in property transactions to apply proportionate but robust scrutiny where international elements are present.
The 12% statistic and what it means for property professionals
Recent supervisory reporting from the Solicitors Regulation Authority identified that approximately 12% of Source of Funds red flags relate to overseas funds or international transactions.
This report is evidence that regulators are actively monitoring international money flows and overseas funds are recognised as a compliance risk, meaning estate agents and conveyancers need enhanced due diligence when it comes to risk management when dealing with clients who’s source of funds are from overseas.
When is Enhanced Due Diligence required?
Under the Money Laundering Regulations 2017, Enhanced Due Diligence (EDD) must be applied where a transaction presents a higher risk of money laundering or terrorist financing. This includes situations such as:
- Clients established in high-risk third countries
- Politically Exposed Persons (PEPs)
- Unusually large or complex transactions
- Transactions involving overseas source of funds
- Cases where the source of wealth is difficult to evidence
- Transactions with a client who holds a passport from a high-risk country even if they don’t currently live there
Even where EDD is not mandatory, a risk-based approach may require additional checks.
What Enhanced Due Diligence Involves
EDD goes beyond standard identity checks.
It typically includes:
Deeper Identity Verification
- Obtaining additional identification documentation
- Verifying beneficial ownership structures
- Independent electronic verification
Robust Source of Funds and Source of Wealth Checks
- Documentary evidence showing how funds were generated
- Review of overseas bank statements
- Evidence of business ownership, dividends, property sales or investments
- Translation and verification of foreign documentation
Jurisdictional Risk Assessment
- Assessing the AML framework of the relevant country
- Sanctions screening
- Adverse media checks
Ongoing Monitoring
- Scrutiny of unexpected changes to funding arrangements
- Review of last-minute substitutions of buyers or payers
- Escalation of concerns to the MLRO where appropriate
Properly documenting the rationale for decisions is just as important as carrying out the checks themselves.
Why this matters for Estate Agents and Conveyancers
Property professionals are often the first point of contact in a transaction. Early identification of risk indicators can prevent delays, aborted transactions and regulatory issues later in the process.
Insufficient scrutiny of overseas funds can result in transaction delays, and if completely ignored of missed can trigger Suspicious Activity Reports (SARs) and regulatory investigations; not to mention reputational damage.
By applying appropriate EDD from the outset, you protect your business, your clients, both of your reputations plus the wider UK property market.
How Credas can support you
As an IDSP, we help property professionals strengthen their AML framework by:
- Assisting with overseas client verification
- Supporting enhanced Source of Funds assessments
- Providing electronic verification and screening tools
- Helping you document your compliance rationale
International transactions are not inherently problematic, but they do require heightened scrutiny. With 12% of Source of Funds red flags linked to overseas money, regulators have made it clear that this is an area of focus.
If you regularly deal with international clients or overseas funds, now is the time to ensure your Enhanced Due Diligence processes are robust, proportionate and defensible.
Get in touch today to discuss how we can help you manage cross-border risk with confidence.
