Mortgage fraud may lead to money laundering offences

With signs that the property market in the UK is beginning to become more active again, solicitors need to be aware of their responsibilities and possible pitfalls under the Money Laundering Act 2007.

According to The Law Society, which has prepared a practice note on the subject for members, criminals can exploit weaknesses in lending and conveyancing systems to gain illegitimate financial advantage from buying properties.

They are most likely either to misrepresent income or property value to obtain greater loans than that to which they are entitled.

Organised crime syndicates also are known to overvalue properties, use false identities and fail to make any mortgage repayments.

As solicitors are involved in most conveyancing work in the UK, they are at the front line of combating possible criminal behaviour but could find themselves criminally liable if a client commits an offence under the Money Laundering Regulations 2007 or Proceeds of Crime Act 2002.

With the extension of the definition of fraud in the Fraud Act 2006, these three pieces of legislation mean a solicitor can be liable even if he or she was unaware of the fraud or actively participated in it.

Courts will assume a high level of knowledge and education on the part of solicitors and often will be less willing to accept claims that legal professionals were unwittingly involved if they have not applied appropriate due diligence.

The practice note which highlights the warning signs of mortgage fraud and outlines how solicitors can protect themselves and their firm from being used to commit mortgage fraud is available on www.lawsociety.org

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Money Laundering Information » Solicitors warned criminals may buy property to launder money