Property investors risk prosecution

Herbert Smith says property investors and their professional advisers risk prosecution under anti-money laundering legislation because of ignorance of important provisions in the Criminal Justice Act 1993 which came into force earlier this year.

A survey by the firm among key players in the property market shows 45 per cent had little or no knowledge of anti-money laundering legislation.

There was, however, general recognition that liability can rest with individual employees.

Survey respondents included directors of property development companies, investment and lending managers employed by banks, investment surveyors and accountants employed with pension funds, partners in firms of surveyors and accountants specialising in property investment.

Simon Bushell, Herbert Smith commercial litigation solicitor, says that legislation aimed initially at banks and financial services businesses is now more widely applicable as criminals turn to the property market to launder money.

“There seems to be a serious information gap about the detailed implications of the legislation,” he says.

Only half of those interviewed were confident that, after making a report to the authorities, they would have no further liability under the act.

Three out of four of the respondents indicated they had handled a transaction that could be deemed suspicious.

And 23 per cent of property managers representing banks and pension funds had experienced transactions where the buyer had dispensed with the usual due diligence procedures.

Only two thirds of companies implemented internal controls to minimise risks of contravening the act.

Bushell says: “A number of Herbert Smith's clients and contacts have sought our guidance during the year on how best to recognise and respond to suspicious circumstances, and so minimise the risk of prosecution under this legislation.”