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Nine out of ten property finders are either turning a blind eye to money laundering rules or ignoring them on purpose, according to their trade body.
An industry-wide investigation by the National Association of Professional Sourcing Agents (NAPSA) looked at 500 firms and individuals and found 99 per cent were breaking money laundering laws.
HM Revenue and Customs recently targeted property finders breaking money laundering rules and fined 136 businesses a total of £1.1 million for failing to register with HMRC before trading.
Property finders often source properties below market value for landlords and investors. HMRC considers property sourcers to conduct "estate agent activity" under the Estate Agents Act 1979, which makes money laundering registration mandatory.
Money laundering laws aim to stop organised crime gangs and terrorists from washing their cash through the UK property market.
"Due diligence is the backbone of ethical and compliant property sourcing. It protects both your business and your clients, setting you apart as a credible professional in the industry," says Tina Walsh, NAPSA's CEO.
"What we find unfortunate is that due diligence is the base of compliance - not a higher standard - and yet isn't met by 99 per cent of sourcing agents.
"Most courses do not teach the due diligence process, particularly around anti-money laundering, and so many businesses are literally risking it all every time they onboard an investor or complete a deal."
NAPSA advises property finders to conduct and retain due diligence checks, including money laundering inquiries, for every investor.
The checks should confirm who owns the property for sale, a valuation report, planning and builders regulation compliance and a money laundering report.
HMRC says: "It's a criminal offence to trade as an estate agency business without being registered or after your registration is cancelled with HMRC for money laundering supervision."
The NAPSA report Critical Mistakes Uncovered in the Property Sourcing Sector says around 10,000 firms or individuals offer property finding services in the UK, with about 4,000 devoted solely to sourcing and the rest offering other services, such as conveyancing, sales or lettings.
The report's main findings include:
Government data shows that around £10 billion a year is laundered through the UK property market
Few property finders are registered with HMRC for mandatory money laundering supervision
Property finders are poorly trained, with some taking courses that promise money-laundering compliance in as little as 10 minutes
NAPSA suggests investors should check that a property finder is registered for data protection, money laundering supervision and a property redress scheme.