Agents of doom and disrepute

I’ve just watched a Channel 4 documentary called “From Russia with Cash”.  The premise is that two investigators go undercover as Russian PEP Boris and his ditsy girlfriend Nastya, and trip around the swankier parts of London looking at five high-end properties, each shown to them by a different estate agent.  Boris is completely up-front with each agent: he tells them that he is in charge of procurement at the Ministry of Health, on a small salary, but that from every contract that he awards, a little bit finds it way into his pocket.  He wants to buy a property, but with complete discretion: neither his employer nor his wife must be able to link it to him.  And not one of the estate agents bats an eyelid.  Of course, I can understand the awkwardness of the situation; you can’t back off with a look of revulsion, not least because Boris probably has friends in low places.  And no-one wants to look like a prude, when Boris confesses that he’s buying a London pad in order to get laid.  But the really worrying aspect of it all is the complete misunderstanding by these estate agents of their legal obligations.

Quick revision.  The Money Laundering Regulations 2007 require certain businesses – including estate agents – to do AML checks and due diligence on their clients.  These agents were all acting on behalf of other people (the vendors of the properties), so no need for them to worry (legally, I mean – morality is another issue) about AML checks on Boris.  But then we also have the Proceeds of Crime Act 2002, and its five money laundering offences that apply to everyone.  Everyone.  Yes, even estate agents meeting Boris.  So these agents who happily tell Boris that, yes, of course they would sell a property to him, and yes, they can recommend a lawyer who can help him set up a Cypriot company with nominee directors so that Mrs Boris cannot find his London shag-nest – how is this not the PoCA s328 offence of entering into or becoming concerned in an arrangement that helps someone else to launder their money?  In the case of this documentary, none of the sales went ahead – I don’t think the investigator had quite that money to spare.  But all the estate agents were willing to proceed on that basis, thinking (hoping?) that as Boris was not their client, they were absolved from all responsibilities under the primary legislation.  And not one of them made a SAR to his MLRO about Boris’s confessions of corruption, so how is this not the s330 offence of failure to disclose by someone working in the regulated sector?  What on earth are their MLROs telling them?  Take the money and run?

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6 Responses to Agents of doom and disrepute

  1. Nick says:

    Quelle surprise!

    Shame that they didn’t continue with this sham and meet some of Lawyers that would be willing to open the gate for Boris to launder his proceeds of corruption.

    I don’t think this is anything new, London has been a global money-laundering centre for years and the City of London will make sure it remains so for many years to come!

    English culture is the problem:
    “There is nothing so bad or so good that you will not find an Englishman doing it; but you will never find an Englishman in the wrong. He does everything on principle. He fights you on patriotic principles; he robs you on business principles; he enslaves you on imperial principles.” – GBS

    • Welcome to the blog, Nick, and thank you for your comment.
      Much as I am happy – well, prepared – to admit that the UK is a centre for money laundering (and always happy to read a bit of George Bernard), I think it’s only fair to point out that estate agents are pretty universally uninformed of their AML obligations. The London ones shown were perhaps even more tempted with the juicy commissions on offer, but their colleagues in other countries are not much better at recognising, accepting and reacting to their vulnerability to being used for money laundering.
      Best wishes from Susan

  2. DAWN TINDALL says:

    Hi Susan – if I recall rightly there was a similar programme a while ago and the many excuses for their actions revolved around not breaching the tipping off provisions. However the lack of SAR reporting on such attempts was and is the main issue. It is certainly something the Guernsey FIU have often reminded us about both in readiness and after the MoneyVal visit last October,

    • Hello Dawn
      You’re absolutely right: the FIS in Guernsey did put out quite a bit of publicity around and guidance on reporting attempted transactions, and indeed the same obligation exists under UK legislation. Thanks for reminding us – it’s something I have been asked to reiterate in recent staff training in Guernsey.
      Best wishes from Susan

  3. robert J Long says:

    I wish I could be surprised.

    That’s the thing about the notion that bad money drives out good (thanks Gresham, I know laundering was not exactly what you had in mind), it only seems to be true up to a point. Sometimes money just attracts money and if there is enough to go round, no one asks about the source. We used to cast wry glances at all the cash flowing round Dubai and suspect much of it was not on the up and up, but we can’t be so superior now given what happens in London. Especially inside the London property Market which broken before you take into account criminal proceeds being washed through it. And there is a innate tension there as the government believes a “vibrant” (polite term for unaffordable to the average earner) property market is a good thing and foreign investment is to be welcomed.

    Some jurisdictions and business areas do very well out laundering thank you very much. They clearly do some individual risk assessment and decide what the hell there is no chance of me being caught. In my previous time working in the corruption sphere I came across all the fascinating work in psychology and behavioral economics on how people justify wrong doing to themselves I am sure the estate agents in the program where performing all those acrobatics in their heads. I am sure the companies they work for emphasis ruthless selling environments and downplay any pesky legal or moral obligation that gets in the way.

    Possibly because I am in a bad mood today I think the best solution to this is some truly horrible and draconian enforcement action. Once a few high flying estate agents have been given big sentences and a few companies bankrupted by it all, they will all fall into line. The sad thing is, that this has not happened as often as it should is partly the fault of myself and my colleagues. Even when we successfully arrest the principal launders, not so good at those that allowed them to get away with it. If the boris was a real case, we would arrest Boris and leave the estate agents alone, despite complicity.

    In the James Ibori case, all those houses he managed to acquire in London. Did anyone look at the agents that sold them?

    • Many readers will be nodding in agreement, Robert. It is precisely this sort of “head in the sand” approach that the new participation offence is designed to address and – as you say – what we need is a few juicy convictions (and not just of estate agents, although that’s obviously a good place to start…). And I think you’re right in your analysis that, were Boris real, the authorities would be pursuing him and not all the so-called regulated professionals who offered to help him.
      Best wishes from Susan

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