Conveyancers: How to spot a 'clean skin' launderer in a property settlement
Property settlements are attractive targets for money laundering, and criminals increasingly use 'clean skins' to avoid detection. Understanding this typology helps conveyancers identify suspicious activity.
What is a 'clean skin' launderer?
Definition
A 'clean skin' is a person with no criminal history or known association with criminal activity who is used to launder money on behalf of organised crime groups. They may be a willing participant, coerced, or even unaware of their role in the scheme.
The term originates from the fact that these individuals have 'clean' backgrounds that would pass standard screening checks. They have no criminal record, no adverse media and no obvious links to criminal networks. This makes them valuable to criminals seeking to distance illicit funds from their source.
Why property settlements are targeted
Property offers several features that make it attractive for money laundering:
High value transactions
Large sums can be converted into legitimate assets in a single transaction, speeding up the laundering process.
Perceived legitimacy
Property ownership is a normal and expected activity, making it easier to explain wealth accumulation.
Value manipulation
Properties can be bought below market value or sold above, creating opportunities to move additional funds.
Complex ownership structures
Trusts, companies and nominee arrangements can obscure beneficial ownership.
Red flag indicators
While no single indicator confirms money laundering, combinations of these factors should raise concerns:
Profile-Related Red Flags
- First-time buyer with unexplained wealth: Young or entry-level workers purchasing high-value properties without corresponding income or family wealth
- Minimal engagement with the property: Purchaser shows little interest in inspections, conditions or normal due diligence
- Acting on instructions: Client appears to be following directions from an absent third party
- Unusual personal circumstances: Recently arrived in Australia, no established employment history or inconsistent background information
- Multiple contemporaneous purchases: Same individual purchasing several properties in quick succession
Transaction-Related Red Flags
- Overseas remittances: Significant funds arriving from offshore, particularly from high-risk jurisdictions
- Third-party payments: Deposits or settlement funds paid by someone other than the named purchaser
- Structured deposits: Multiple smaller deposits that appear designed to avoid reporting thresholds
- Cash components: Any significant cash component in the transaction
- Rapid resale: Property sold shortly after purchase, particularly at a loss or to a related party
- Unexplained price variations: Purchase price significantly above or below market value
Illustrative scenarios
(These are fictional examples for educational purposes only)
Scenario 1: The student purchaser
A 22-year-old international student purchases a $1.2 million property. When asked about the source of funds, they explain it comes from family overseas. However, the funds arrive from multiple accounts in different countries and the student shows little interest in the property's features or location. They defer all decisions to a 'family friend' who attends meetings but is not named on any documents.
Scenario 2: The helpful relative
An elderly woman with no prior property ownership history suddenly purchases three investment properties worth $2.5 million total. Her nephew, who has a history of criminal associations, accompanies her to all meetings and provides instructions on her behalf. She appears confused about basic details of the transactions and cannot explain the source of funds beyond saying 'my nephew organised it'.
What to document and when to report
When you identify potential red flags, your response should be proportionate to the level of concern:
Your Response Framework
- Document your observations: Record the specific facts that raised your concern, when you observed them and any explanations provided by the client.
- Seek further information: Ask reasonable questions to understand the situation. A legitimate explanation may resolve your concerns.
- Escalate internally: Discuss with your AML Compliance Officer or senior colleagues if concerns persist.
- Consider enhanced due diligence: Request additional documentation, verify information through independent sources or obtain senior management approval to proceed.
- File an SMR if required: If you form a suspicion on reasonable grounds, you must report to AUSTRAC within the required timeframe.
- Maintain confidentiality: Do not disclose to the client that you have reported or intend to report. Tipping off is a criminal offence.
Remember: You are not required to prove money laundering. If you have a genuine suspicion based on reasonable grounds, you should report it. AUSTRAC and law enforcement will investigate.
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