Solicitors falling foul of fraudulent vendors must shoulder AML costs says the Court of Appeal.
Imagine the scenario – you find your dream home, contact the estate agent, make an offer, arrange the surveys then pay a solicitor to act on your behalf. You exchange and complete the purchase, and transfer your life savings. Only to find out that the house was never the vendors’ to sell.
That is the situation two parties recently found themselves in – and who have now successfully taken solicitors for both the sellers and the buyers, to court. They were able to claim costs and the purchase price, saying that they were negligent.
Previous court cases ruled on different issues around the matter, but this latest court of appeal ruling has ruled that solicitors representing fraudulent property sellers should (in some cases) share the costs with the solicitors acting for the buyers that were defrauded.
Anti Money Laundering Checks
It’s an identity fraud double whammy. As both the estate agents involved should have carried out appropriate due diligence checks on the alleged vendors. Then the solicitors from both sides should have verified the identification of the purported vendor, in line with anti-money laundering (AML) regulations. In these cases, it seems that the fraudsters were renting the property and were able to pass themselves off as the legal owners.
Here at Credas, we work with estate agents and the legal profession. For both sectors, this court of appeal ruling is a pivotal one.
Rob Hailstone, CEO of Bold Legal Group, said on hearing of the ruling: “This is a warning siren to all of us who work in the property industry, from estate agents to property lawyers. We need a thorough, easy to use and accurate identity checking system to ensure these checks are carried out correctly, as well as internal AML frameworks.
“At Bold Legal Group we have put together a red flag warning list, which gives our member firms a list of more than 20 situations when the fraud alarm bells should be ringing. It is a guidance document that forms part of our wider framework. Using guidance such as this, as well as an accurate identity checking system means that we can be more confident with our AML checks.”
CEO of Credas, Rhys David said; “It still surprises me that situations such as this can arise. There are so many points during this episode where a simple, accurate and thorough identity check would have ‘have eradicated the issue and exposed the fraudster.
22% do not have a dedicated AML officer say Credas
Credas recently carried out some research which found that 22% of property agents did not have a dedicated AML officer and almost a third of businesses are still using a paper-based storage system for filing their AML data.*
Put simply, court cases like this highlight why in this day and age those businesses who are burying their heads in the sand around AML and RTR will come to a cropper. It seems now is not the time to ignore AML regulations.
* The study was conducted by OnePoll between 7th December 2017 and 15th December 2017 and polled 100 estate agents. Participants were recruited online and were paid to participate.
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Notes
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Credas can assist with:
- Anti Money Laundering (AML)
- Right to Rent (RTR)
- Verification of legal Right to Work (RTW)
- Modern Slavery (MS)
- Know Your Customer (KYC)
