It’s been a sluggish few years for the UK housing market. Data from Nationwide shows market activity has remained broadly flat over the past 12 months, and is 15% lower than pre-Covid levels in 2019. This has naturally led to less work for conveyancers, with data from Search Acumen’s Conveyancing Market Tracker showing that the number of firms actively undertaking conveyancing work has fallen from 4,317 in 2014 to 3,857 in 2024, a decline of 11%.
Recent changes to the Bank of England Bank Rate have, however, seen some optimism return to the property market. In fact, Rightmove figures show the number of enquiries to estate agents from prospective buyers since 1 August is up 19% compared with a year ago. This buoyancy from interest rate cuts, along with the new Labour government’s ambitious target to build 1.5 million homes over the next five years, is set to put more work on the desks of conveyancing firms.
As always, each transaction will require conveyancers to carry out robust identity verification and source of funds checks on buyers and sellers, to verify that they are who they say they are and that the origins of money used have been sourced legitimately. A buoyant housing market will increase this caseload, particularly as criminals may see this upcoming boom as an opportunity to move money illegally.
Conveyancers must balance the need to meet the new government’s ambitions for fast transactions with “minimal blockers”, the need for seamless customer onboarding, and their obligations to identify and prevent potential criminal activity – all of which is easier said than done.
Fighting the growth of financial crime
Financial crime has the potential to erode consumer trust and hinder economic growth and competitiveness. According to our research, property professionals who experienced financial crime jumped from 17% in 2022 to 27% in 2023. Nearly half of legal professionals and 42% of accounting firms also recorded increases in financial crime attempts last year.
Selling and buying property is an ideal cover to carry out money laundering, with criminals investing £6.7bn of suspicious funds into UK property since 2016. Data from HM Land Registry also shows the number of attempted property frauds has increased by 70% in the last five years.
With such sharp rises in fraud attempt rates, it’s more important, yet harder than ever for professionals in the industry to balance staying compliant with the growing amount of anti-money laundering (AML) regulations they face, along with their other regulatory requirements.
As part of their AML obligations, all conveyancers and solicitors must carry out comprehensive checks to verify their clients’ identities to prevent illegal activity, in line with their duty under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. Proving source of funds is also a requirement of these regulations, due to the large sums of money which change hands as part of a property transaction, which can be susceptible to fraud.
The UK government’s Economic Crime and Corporate Transparency Act also came into force in March, with one of its key functions to improve transparency on the ownership of UK property by overseas entities.
Companies that fail to take appropriate measures to prevent fraudulent activity in this space will be found non-compliant, and could face large fines or even be prosecuted for criminal wrongdoing.
Assistance with added pressure
The difficulty for conveyancers is that uncovering fraud can be like finding a needle in a haystack. This is particularly true for international individuals, who are often considered to be a higher risk for potential fraud due to the complexity and variability of verifying their identification documents. Being able to identify international individuals is especially critical for the UK property market, where the number of properties owned by overseas individuals has more than doubled since 2010, according to the Centre for Public Data.
An increased influx of transactions will apply further pressure on conveyancers in these areas. Even though the vast majority of sellers or buyers they interact with will be legitimate, just one misstep with identity verification can have huge implications for their business.
With an influx of transactions expected thanks to the changes to the Bank of England Bank Rate and the proposed increase in house building targets, traditional approaches to identity verification and source of funds will not be sufficient for conveyancers. Manual processes are time-consuming and prone to human error, increasing the risk of overlooking fraudulent activity – especially when dealing with a higher volume of transactions. Those still using this approach will require a more robust alternative.
Comprehensive global digital compliance solutions can help conveyancers manage an influx in transactions and enable them to achieve balance between demonstrating compliance and reducing friction when onboarding new customers. These solutions can encompass identification, verification, and screening; facial recognition, document capture, and liveness appraisal capabilities; and digital fraud and source of funds checks, to give conveyancers a comprehensive view of compliance and deliver peace of mind that all checks have been carried out.
For those conveyancers already using digital solutions to complete anti-money laundering (AML) checks, integration with existing systems will also be key to handle the increased volume of transactions they expect to face. These conveyancers will be empowered with the ability to oversee and manage all aspects of AML compliance from one centralised location.
The power of partnership
Conveyancers need partners they can trust to deliver high quality services that verify individuals – no matter where they reside – and source of funds for money used in the transaction, with the added reassurance that the data used to do this is trustworthy and from a reliable source. With trusted partners, conveyancers can be assured that they are complying with the latest AML rules and regulations, all while maximising the chances of spotting fraudulent activity.
Nicola Gifford is General Counsel at SmartSearch
