The cash buyer with a government contact
You are an MRICS chartered surveyor in a firm that also provides agency services. A new client wants to buy a £1.25m office unit through a company registered in a secrecy jurisdiction. The sole director attends with a passport and utility bill in different names, explaining he recently changed his name. He offers a £300,000 deposit in three cash instalments over two weeks, saying it comes from 'family savings', and asks that the firm not involve banks until completion. The company's ownership documents are undated and list a nominee shareholder. He is impatient, offers a £15,000 bonus for exchange within 10 days, and mentions that a 'government contact' can speed up planning. Your firm is registered with HMRC for AML supervision. The MLRO is on leave for a week.
1. Identify the AML red flags in this instruction and explain why they matter.
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The cash deposit is a red flag because £300,000 in three cash instalments is unusual for a property transaction and creates a weak audit trail. The secrecy-jurisdiction company, undated ownership documents and nominee shareholder obscure the beneficial owner, so I cannot tell who really controls the buyer. The passport and utility bill in different names, with a recent name change, require verification rather than acceptance. The request to avoid banks until completion is designed to reduce scrutiny. The 'government contact' and offer of a £15,000 bonus for a 10-day exchange suggest urgency and possible corruption. The client is impatient and wants to bypass controls. These facts matter because the firm is HMRC-supervised for AML and must conduct customer due diligence, identify beneficial owners, screen for PEPs and sanctions, and obtain evidence of source of funds and wealth. A high-risk case requires enhanced due diligence, not a quick completion.
2. What must you do before exchange or completion?
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I would stop the transaction from progressing until CDD is complete. I would verify the director's identity with reliable, independent documents, reconcile the name change, identify the company's beneficial owners and test the nominee arrangement. I would screen the client and beneficial owners against sanctions and PEP lists; the 'government contact' makes PEP risk relevant. I would obtain documentary evidence of source of funds and wealth for £300,000, not just an explanation. Because the MLRO is on leave, I would use the firm's deputy MLRO or escalate to the principal; absence of the MLRO is not a reason to proceed. If suspicion remains, I would submit a SAR to the NCA and wait for consent before any exchange or completion, and I would not tip off the client. I would record all checks and decisions. I would not accept the cash or the bonus.
3. Can you continue acting if the client refuses to provide source-of-funds evidence?
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No. CDD is not optional, and I cannot safely proceed on an explanation alone when the risk factors are this strong. If the client refuses or gives inconsistent evidence, I would not exchange or complete, and I would consider ending the engagement. I would record the refusal and the reason. If I suspect money laundering, I would make a SAR and avoid any disclosure that could tip off the client. If I have no suspicion but simply cannot complete CDD, I still cannot act; the firm should decline. I would also consider whether the firm should report the matter internally and whether any continuing agency relationship creates a risk. The £15,000 bonus and the request to avoid banks would not change the answer; they increase the risk. I would seek the MLRO's decision as soon as possible and not treat the week's absence as a reason to delay controls.