BUYERS HAVE become used to a barrage of questions from estate agents and solicitors - even if they cannot see why the purchase of a home should require so many checks. Does it matter whether the money is coming from the sale of a holiday home, redundancy or an inheritance from a great aunt?
Unfortunately for those who regard all their financial affairs as secret and object vociferously to close questioning, the law does not see it that way. Estate agents and lawyers must report any activities that they find suspect about the funding of a purchase.
At present, six leading City of London law firms are being investigated on suspicion of laundering money. One detective referred to the fact the people are still walking into a solicitor's office, buying a house and giving him cash.
"A lot of people are not as inquisitive as they should be," says a spokesman for the National Criminal Intelligence Service. "A solicitor who accepts a deposit of pounds 1m for conveyancing fees of pounds 2,000 stands to make a lot of interest. Estate agents also should ask harder questions about where money comes from."
This is a view shared by Noel de Keyzer, at FPD Savills' Hampstead office in north London. "If we have any sense or suspicion that money is being laundered we have to report it. Estate agents are perhaps too ready to pass the onus of responsibility on to a lawyer."
Since complicated financial deals are a regular feature of the international property market in London, experience and a gut feeling are often all they have to go on. "We were recently asked by a purchaser to value a house in the name of the current owners - something that we refused to do.
"The money was coming from Scandinavia, but the buyers wanted it to look as though the house was being purchased with a bank's finances by putting it through an offshore company," says de Keyzer. "Interestingly, one developer, as the owner, had agreed to do it."
Estate agents tend to get much closer to buyers than do solicitors and can end up with an intimate knowledge of someone's affairs. Even then it can be difficult to separate what is questionable from what is unlawful.
Noel de Keyzer had dealings with a Russian who owned a number of million- pound properties and had a Swiss bank account. "He was a college lecturer who used to be a member of the Communist Party and I was suspicious of where his money was coming from. It may have been perfectly legal, but I referred it to our compliance officer and it did turn out to have come from an illegal source."
Along with many other agents, Avril Butt of de Groot Collis has seen more bogus buyers with nothing to hide but their fantasies, than crooks. "But I have been asked to produce a very high valuation for someone who was being lent millions by a Swiss bank. It would have meant he had to put down less himself. We always have to tread carefully."
It is easy to spot a dodgy deal if men in shades and limos turn up to sign a deal. At Knight Frank, Christopher Cornell, compliance officer for the residential sector, says the buyer with a bodyguard and a suitcase full of cash was more common five or 10 years ago.
He says: "Typically we might be suspicious if someone immediately offered the asking price or even higher, if they only met their solicitors recently or they could not provide effectively backed references. There are signs we all understand that point towards some- thing not being bona fide. You can't automatically include transactions through offshore companies though, since that is commonplace now. Once the matter is reported to me, I decide whether it should be passed on to NCIS for investigation."
Sweeping changes are being proposed by the government to the confiscation and money laundering laws, which would toughen the requirement to report suspicious funds. The lucrative trappings of crime, such as luxurious mansions, will be far easier to confiscate as civil courts are given the power of forfeiture.
When buyers say they want to pay cash for a property, they usually mean that only part of it is being paid for with a loan, whereas an agent would be obliged to report a request to complete all in cash, says Linda Beaney of Beaney Pearce.
The company has just drawn up guidelines for the rental market and warns against taking cash as a deposit. "If the depositor changes his mind and requests a cheque, he can then walk away with clean money drawn on a respectable letting agency, having asked you, in effect, to launder cash."
But it can be easy to miss the plot. Ugo Palazzo is a partner with McCormacks Solicitors in east London. All new clients are sent out a detailed questionnaire covering matters from finance to identity and he is not unfamiliar with people who try to conceal their identities.
"I was suspicious of someone who responded from Spain to a letter I had sent him only the previous day to an address in Essex. The man wanted to buy a house in the area. I had my doubts and decided not to act for him thinking he might be trying to launder money.
"But I was barking up the wrong tree. It transpired that someone connected to an estate agent was involved in back-to-back deals. The property was sold for some unsuspecting client for pounds 35,000, and then sold again for 50 per cent more a week later. You have to think like a policeman these days."
Just what NCIS likes to hear.
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