Money Laundering v Mortgage Fraud

We see many Property Professionals and Lawyers getting confused by the differing obligation of the Money Laundering Regulations and the Fraud Act. You can be found criminally liable if your client commits mortgage fraud, due to the Fraud Act 2006 and the Anti-Money Laundering Legislation. You can be liable even if you were not aware of the fraud, the Courts will assume a higher level of knowledge and will be less willing to accept that you were unwittingly involved if you have not applied the appropriate due diligence.

Because the Anti-Money Laundering Legislation applies a “Risk Based Process” we see that MLRO’s have differing appetites for risk, some firms take a belt and braces type approach, whilst other firms have very lax policies and procedures.

Mortgage Fraud occurs where individuals defraud a Financial Institution or Private Lender through the mortgage process.

The definition of fraud in the Fraud Act 2006 covers fraud by false representation and by failure to disclose information where there is a legal duty to disclose. False representations can be made explicitly or implicitly and may occur even where you know only that the representation might be misleading or untrue.

The value of a mortgage obtained through fraud is the Proceeds of Crime. Under the Proceeds of Crime Act 2002, you risk committing a Money Laundering Offence if you acquire, use, have possession of, enter into an arrangement with respect to, or transfer this criminal property.