How New Technology Is Helping Tackle Money Laundering

Money laundering costs the UK more than £100bn annually and has been highlighted as a growing risk in residential and commercial property off the back of the Pandora Papers.

The failure of some property professionals to comply with anti-money laundering (AML) regulations means they risk supporting the laundering of dirty money.

But new Open Banking, AI and facial recognition technology combined with source of funds checks can both automate and enhance AML checks.

So, rather than risk fines or reputational damage, professionals with AML obligations should instead look to new technology that can help.
 

What’s the issue?

 
A joint report from HM Treasury and the Home Office in 2020 assessed the risk of money laundering in the property sectors as high, up from medium. The increase was in large part because of the growth in ‘overseas buyers and cash flows into the UK property market’.

Estate agency risk also increased from low to medium in the same report.

The report noted weaknesses in anti-money laundering and counter-terrorist financing controls, limiting the mitigations against the risk of money laundering in the sector.

Common failings included a ‘lack of bespoke policies, controls and procedures aligned with an appropriate risk assessment of each firm’s clients.’.

So, the UK faces an increased risk of laundered money making its way into the UK property market.

What’s more, there are serious implications for conveyancers and estate agents that fall foul of their obligations. There have been a growing number of high-value and high-profile fines in recent years.
 

What’s the solution?

 
New Open Banking technology enables professionals to gather the financial information they need and perform more enhanced checks than can be done manually.

For instance, Thirdfort is the first business to build on top of the rails provided by Open Banking to power a new AML solution for property and legal professionals.

Our platform combines Open Banking, data analytics, and the latest in biometric and cryptographic verification to meet AML obligations. It is the only company to combine ID and source of funds checks to offer best-in-class AML for property professionals.

The app also enables real-time checks of all major Know Your Client (KYC) databases, including ongoing Politically Exposed Persons (PEPs) and sanctions monitoring.
 

Advantages of Open Banking

 
The benefits of Open Banking are clear.

First, it ensures AML checks are more robust than those done manually.

For instance, when conducting a house sale, Open Banking means the information lawyers and estate agents receive on the buyer and seller comes straight from the buyer or seller’s bank.

This removes the ability of the buyer or seller to tamper with it or forge documents.

Second, Open Banking also makes the process smoother and quicker.

Agents and conveyancers can sign-post where appropriate due diligence and Source of Wealth checks are carried out within a transaction, for instance.
 

What’s next?

 
Longer-term, we can see the benefits of using Open Banking technology to enhance AML checks in other regulated sectors that use the same manual and clunky methods.

An individual should not have to go through manual KYC and AML checks multiple times a year from scratch.

We also see huge potential internationally where Open Banking is six to 12 months behind in Europe and often 12 or more months behind in other western countries.

When there are already so many ways to fall foul of money laundering regulations, professionals should make better use of the latest technology to automate and enhance what checks they can. And Open Banking is fast becoming a necessity to both ensure the checks are secure and make the process much quicker and smoother.

Written by Olly Thornton-Berry, co-founder and Managing Director, Thirdfort