The property transaction is subject to many potential risks and legal firms are coming under increasing pressure in their obligations to prevent and identify financial crimes, and protect their clients’ interests during their transactions.
The property market continues to be a prime target for financial fraud and money laundering, with a staggering £6.7 billion of suspicious funds funnelled into UK property since 2016. Both residential and commercial properties are vulnerable to exploitation by organised crime.
According to latest reports from the SRA, only a third of firms adequately adhere to anti-money laundering regulations. Perhaps unsurprisingly this led to 47 enforcements resulting in fines exceeding £137,000 in the last year, along with 24 suspicious activity reports made to the National Crime Agency by the SRA alone, involving assets exceeding £75 million.
AML compliance facing greater scrutiny
In 2024, AML compliance will come under even greater scrutiny with the SRA and CLC, as firms persisting in inadequate compliance management practices are more likely to receive even tougher sanctions.
Firms must embrace a transparent, traceable approach for ID and AML risk management. Screening solutions, supported by advanced technology, don’t just cut down on expensive manual processes, but also help firms better evaluate potential risks they face. Moreover, this technology ensures ongoing monitoring, adding an extra level of security and precision to compliance checks.
Balancing the right searches and mitigating risk
Title issues, seen in about 15% of transactions, can also pose a risk to the speed and success of a property transaction. From planning and building regulations problems, to insolvency and restrictive covenants, title issues can cause delay, disruption and even collapse of the property transaction.
The increasing scope of property searches can make choosing the right types of searches a challenge. Technology solutions step in to assist in decision-making. For instance, tmgroup’s conveyancing platform recommends necessary searches using its smart location-specific risk alerts and user-friendly data layers, aiding conveyancers in identifying potential property constraints, such as listed building or Highways’ information.
There can also be situations in which a buyer might opt to move forward without the necessary searches. These may be due to time constraints, where urgency is paramount and the wait time for searches is not feasible or acceptable, or where searches have been acquired, but become considered ‘out of date’ by the time the transaction is ready to complete. Search indemnity policies, such as a no search, delayed search or search validation indemnity policy, can be purchased to reduce the buyer’s risk.
Due diligence, underpinned by smart technology
Due diligence keeps risk to a minimum. Managing risk can also be easier when firms have access to information dashboards. These offer conveyancers a convenient, reliable method of keeping track of cases that require attention and can facilitate auditing trails.
Jonathan Stebbings, Chief Commercial Officer at tmgroup, comments:
“With further strengthening of sanctions for AML non-compliance, and increasing risk exposure to movers’ searches and title checks through extended transaction delays and tighter lender demands, I would urge legal firms to reassess their risk management strategies now more than ever.
“At tmgroup, our mission is to make the transaction process as seamless as possible and remove potential obstacles and risks to both our client and their customers. As a leading provider of property searches and conveyancing services, we deliver a range of integrated risk management tools to help legal firms to safeguard their clients’ interests and reduce disruption and delays in the transaction process. These include the highest standard Safe Harbour ID and anti-money laundering checks, secure and validated law firm checks, and comprehensive title and search validation insurance policies, through solutions offered by our integrations with Thirdfort, LMS confirmly, Lawyer Checker, First Title and CLS.
“Our range of innovative data services, property searches and industry partnerships ensure that property professionals can adopt best risk management practices with greater confidence and efficiency.”
Legal professionals can learn more about residential risk management in tmgroup’s series of free educational webinars, or get in touch to explore their range of risk management solutions.
