The Cash Buyer, the Absent Aunt and the Offshore Company
On a Friday afternoon, a young man, N, walks into your notarial office with a draft sale deed for a tea estate in Badulla priced at LKR 120 million. He says he is a 'business consultant', aged 28, and that the purchaser will be his aunt, a 70-year-old retired teacher who is not present. He produces a copy of her NIC and a letter purportedly signed by her authorising him. He offers LKR 60 million in cash in two sports bags and says the balance will come by draft from a Seychelles company whose sole director is a foreign national. The seller's attorney demands completion within 48 hours because of a 'tax deadline'. N refuses to provide bank statements or explain his aunt's source of funds, saying: 'You are a notary, not a tax officer.' Your office has an AML/CFT policy and a trained cashier.
1. Identify the money-laundering red flags and the CDD you must perform.
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The red flags are cumulative: LKR 60 million in cash; a 28-year-old intermediary; an absent 70-year-old purchaser; a letter of authority that is easily forged; an offshore company from a secrecy jurisdiction; urgency tied to a 'tax deadline'; refusal to provide source of funds; and a price far above the apparent profile. CDD requires identifying N and the aunt, verifying NIC and address, obtaining a properly authenticated power of attorney, identifying the beneficial owner of the Seychelles company, screening for PEPs and sanctions, and establishing source of wealth and source of funds. The notary should ask why the aunt is not present and verify her authority by telephone or video, not merely accept the letter. Because of the cash and offshore elements, enhanced due diligence is required. If the answers are unsatisfactory, the notary must not proceed.
2. What should you do, and what records must you keep?
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Refuse to complete. Do not take the cash into the office account; if it is already there, safeguard it and do not disburse. File a suspicious transaction report with the Financial Intelligence Unit promptly. The law protects good-faith reporting and prohibits tipping off the client. Keep records of the CDD, the refusal, the STR and the reasons for suspicion for the required period. Inform the seller's attorney only to the extent necessary and without tipping off. Consider whether the firm should continue acting; if not, withdraw professionally. The notary should also check whether the draft deed and the letter of authority are genuine, and if there is a reasonable suspicion of forgery, consider a police report.
3. What office controls should be in place for this kind of transaction?
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The office should have a written AML/CFT policy approved by the principal, a designated compliance officer, risk-based CDD forms, cash-handling limits with dual control, PEP and sanctions screening, staff training, record retention for at least the statutory period, and an annual independent review. A clerk should not accept instructions or cash alone. There should be a procedure for third-party payments and offshore entities. These controls protect the notary from being used as a conduit and support a defence of due diligence if the transaction is later investigated.