The Attorney - Client relationship in land transactions and AML/CFT legal obligations The Law Association of Trinidad and Tobago Susan S. Francois Director, FIU October 30, 2018
Increasing Fraudulent Property Sales? • Police report increase in land fraud • Trinidad Guardian, Oct 04 2012 • Agriculture Minister Clarence Rambharat confirmed that he has referred several matters of land fraud to the Fraud Squad for further investigation… • Sunday Express, T&T's land fraud problem Jun 6, 2018 • Retiree charged with $120,000 land fraud • Sunday Express, Jul 3, 2018
FIUTT’s Analysis on Property Fraud Fraud is being committed in the process leading to the transfer of property in the real estate sector Intelligence can be categorised under: The perpetrators • • The technique
The Perpetrators - Who are involved? • Persons who may have knowledge of, or access to: • Unoccupied property • Property owned by someone who has died or lives abroad • Property in which taxes and other assessments are unpaid for long periods which suggest owner absenteeism • Official stamps of attorneys-at-law • Employed in Government Departments involved in the conveyancing process • Attorneys-at-law
The fraud - How is it being committed? Two common scenarios : • A Fraudulent Deed (assent/conveyance) is registered in the Land Registry. This deed has every appearance of a legitimate deed except that the signatures of the parties – the vendor, attorney-at-law, witnesses, commissioner of affidavits are all forged. The property is then sold to an unsuspecting buyer • Identity fraud: An imposter posing as the true owner agrees to sell property to X. The imposter presents false identification in the name of the true owner at each stage of the conveyancing process
• When a fraudster impersonates a property owner and absconds with the purchase money, which honest party should be liable for the loss? • Is it - • the true owner of the property? • the innocent buyer? • the seller’s attorney? • the buyer’s attorney? • the real estate agent ?
Consequences for the Attorney-at-law • Attorneys on both sides of a transaction can be equally liable to protect clients’ money following a property fraud, irrespective of who they are acting for • P&P Properties Limited v. Owen White and Caitlin • Dreamvar (UK) Limited v. Mishcon de Reya and Mary Monson- solicitors • Both cases involved innocent parties who thought they had purchased properties in circumstances where a solicitor purported to act for the genuine owner . After purchase price was paid it was discovered that the sellers were fraudsters who had disappeared with the money
Court of Appeal • Buyer & Seller • the buyer's solicitor/seller’s solicitor hold purchase monies on trust for the buyer until there is a genuine completion • In a fraudulent purchase transaction there is no genuine completion because the contract is a nullity. • Therefore, the buyer's solicitor are in breach of trust when purchase monies are paid away to the fraudster • Buyer’s Solicitor – has a duty to advise clients on the potential risk of identity fraud if there are red flag factors putting the buyer's solicitor on notice of an enhanced risk • Seller’s Solicitor - do, in fact, undertake that they represent the true owner of the property as they identify their client in the contract as the real owner
Unsatisfactory Client Due Diligence • In both Dreamva r and, P&P the seller's solicitor were found not to have undertaken satisfactory client due diligence • In Purrunsing Buyer’s solicitor failed to disclose or advise the buyer that he received an unsatisfactory response to a question he asked which was designed to show that the seller was the owner of the property and entitled to sell it and that in consequence, there was a risk in proceeding with the purchase
Financial Action Task Force (FATF) Recommendations • Established by the 1989 G-7 Summit in Paris FATF is an independent, inter-governmental body that develops and • promotes policies to protect the global financial system against Money Laundering (ML) and T errorist Financing (TF) and now Proliferation Financing (PF) • 40 Recommendations issued by FATF are recognised as the global AML/CFT/PF standards • 40 Recommendations define actions States MUST implement to counter ML/TF/PF threats
Money Laundering and Financing of Terrorism Crimes Take the Profit out of crime- “Follow the Money” NO Money for Terror
Terrorism Resourcing
AML/CFT Legislative Framework • The AML/CFT legislative framework of Trinidad and T obago comprise the following key laws: • The Financial Intelligence Unit of Trinidad and T obago Act and Regulations, Chapter 72:01 • Proceeds of Crime Act and Regulations, Chapter 11:27 • The Anti-T errorism Act and Regulations, Chapter 12:07
AML/CFT REGULATED ENTITIES NRFIs & Listed Businesses Financial Institutions Section 2 of the POCA Financial Intelligence Unit of Trinidad and Tobago 31/10/2018 15
Attorneys-at-Law - a Listed Business (POCA- First Schedule) An Attorney-at-Law falls within the AML/CFT regime when performing the following functions on behalf of a client: • Buying and selling of real estate; • Managing client money, securities and other assets; • Management of banking, savings or securities accounts; • Organisation of contributions for the creation, operation or management of companies; • Creation, operation or management of legal persons or arrangements and buying and selling of business entities.
Trust And Company Service Providers - TCSPs Acting for a third party in relation to the following activities: • acting as a formation agent of legal persons; • acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership or a similar position in relation to other legal persons; • providing a registered office , business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; • acting as (or arranging for another person to act as ) a nominee shareholder for another person; or • acting as (or arranging for another person to act as) a trustee of an express trust
5 Pillars of AML/CFT Obligations Customer due diligence Written Source of wealth/ funds policies & Risk-Based Independent Beneficial Owners customer Designate a Staff procedures audit of PEPS due- Compliance training & controls systems and diligence officer program Report Suspicious controls Transactions procedures Record Keeping
RISK BASED APPROACH
CDD Measures – Part III of the FORs • Reg. 15 requires you to obtain relevant documentation on the client • full name; permanent address and proof thereof; date and place of birth; nationality; place of business/occupation; occupational income; signature; purpose and intended nature of the proposed business relationship or transaction and source of funds; and any other information deemed appropriate • Reg. 16 – Business customers- requires you to verify the identity of the directors and other officers of a company, partners of a partnership, account signatories, beneficial owners and sole traders by means of documentary evidence • Reg. 18 -Where the information cannot be verified, the financial institution or listed business shall report the matter to the Compliance Officer and discontinue any business relationship with the customer. CDD is intended to enable a legal professional to form a reasonable belief that it has appropriate awareness of the true identity of each client
CDD re PEPs Take Measures to determine whether a customer is a PEP Conduct EDD Obtain Senior Management approval Determine Source of wealth/SOFs Discontinue relationship if info cannot be verified/false & report to Compliance Officer/FIU Conduct enhanced on-going monitoring of the relationship 31/10/2018 21
Important Points to remember • Apply CDD before providing services to Clients • Identify and verify the identity of the client , be he/she the vendor or purchaser; • If acting for the Vendor, that the person before you is the true owner/duly authorised agent • If there are discrepancies, make further enquiries and obtain satisfactory responses prior to proceeding • Institute internal procedures to help identify potentially higher-risk transactions/sellers at an early stage • The risk profile is greater for the Purchaser’s attorney -at-law who should, therefore, conduct a level of verification on the seller’s identity • Apply Enhanced due diligence measures where higher risks are identified
RISK FACTORS Purrunsing v A'Court & Co (A Firm) and another [2016] EWHC 789 (Ch) Court pointed out factors which should have alerted S’s Attorney: • the property was unoccupied • it was not subject to a mortgage • it was a reasonably high value property • S was pressing for completion within 7 days • S produced no documentation linking him to the property • an earlier sale had fallen through when S refused to supply information about his employer • in that earlier sale, there was an unexplained inconsistency between the information supplied by S and the results of the buyer’s local search • S was abroad and not returning to the UK before completion
Recommend
More recommend
