Money laundering & mortgage fraud Flashcards
What should you do when Current owner has owned property for less than six months?
Ask why they are selling so quickly
What should you do when Property price has increased significantly in a short period of time or out of line with current market?
Query the valuation
What should you do when the deposit is being paid by someone other than the buyer?
Ask: why; where the money is coming from; and (subject to your duty of confidentiality) tell the lender.
What are the three warning sign regarding the value of a mortgage fraud
- Property price has increased significantly in a short period of time or out of line with the current market
- deposit being paid by someone other than the buyer
- deposit has been paid direct to seller
- surplus money left after the mortgage has been repaid and you are asked to pay the money into the account of someone you do not know.
Identify the three elements which make up a ‘Regulated Mortgage Contract’
- A lender provides credit to an individual or trustees
- The obligation on the borrower to pay is secured by a legal mortgage on land in the EEA
- at least 40% of the property is used, or will be used, as.a dwelling by the borrower or to an individual who is a beneficiary of the trust or a related person.
What restrictions apply under FSMA in relation to advising on the merits of a mortgage of a residential property?
Art 53A RAO says giving advising to a borrower / potential borrower which is advice on the merits of entering into a particular regulated mortgage contract is a ‘specified activity’
If the mortgage is a ‘regulated mortgage contract’ then this would be a regulated activity under s.19(1) FSMA and, in order to give this advice, the solicitor would need to authorised by the FCA or exempt.
What restrictions apply under FSMA in relation to advising on the merits of a mortgage of a commercial property?
There are no restrictions.
If the property is not used as a dwelling the mortgage contract will not be a ‘regulated mortgage contract’ so advising on it cannot be a ‘regulated activity’.
Where can you find the definition for ‘relevant person’?
Regulation 8(2)(d) of the MLR 2017 includes ‘independent legal professionals’.
Where can you find the meaning of ‘independent legal professionals’?
Regulation 12 MLR 2017
A solicitor ‘assisting in the planning or execution of the transaction or otherwise acting for or on behalf of a client in the transaction’ will be ‘participating’ in that transaction.
Where do you find the steps to carry out CDD, and what are they?
Regulation 28 MLR
You must:
- identify the customer and verify their identity on the basis of documents / information from a reliable source
- assess the purpose and nature of the business relationship/transaction.
Where can you find the timing for verficiation?
Regulation 30 MLR
Reg 30(2) requires us to carry out CDD before the establishment of a business relationship or the carrying out of the transaction. This is subject to Reg 30(3) and (4).
Where can you find the definition of ‘business relationship’?
Regulation 4 defines ‘business relationship’ as a business / professional / commercial relationship which is connected to the business of the ‘relevant person’ and is expected to have an element of duration.
What does ‘element of duration’ in a ‘business relationship’ mean?
Every transaction takes time so ‘element of duration’ must mean more than the time taken for one particular transaction.
What is a ‘third party instruction’?
Where A gives instructions to the solicitor on B’s behalf.
