Purchasing property in the UK is a common method used by serious organised criminals to launder the proceeds of criminal activity. The sheer size of the property market in the UK and the high value of property assets means that extremely large amounts of criminal funds can be ‘cleaned’ in a single transaction.
Although estate agents don’t handle transaction monies, they are often the first port of call in a property transaction and so they are best placed to identify and verify the parties to a transaction and report any suspicious activity at the outset of the transaction.
Money laundering can take many forms, but in the property sector it can involve:
- Buying a property asset using the proceeds of crime, letting it, or selling it on, giving the criminal an apparently legitimate source of funds
- Criminals hiding behind complex company structures involving multiple countries and multiple bank accounts to disguise the real purpose of a transaction and hide its beneficial ownership
- A more direct method of paying an estate agency business or lettings agent a large amount and reclaiming it later
- The money for a purchase resulting from a mortgage fraud operation
Estate agents are regulated by HMRC. A regulated business must comply with The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 as amended by The Money Laundering and Terrorist Financing Regulations 2019 which requires estate agents to have a written anti-money laundering policy in place.
A copy of the anti-money laundering policy must be given to all staff. Staff must also receive anti-money laundering training, which AML and compliance can provide for Estate agencies. The anti-money laundering policy should supplement staff training. This policy should be reviewed regularly to ensure that it complies with HMRC guidance and HMRC recommend this is done annually.
Estate agents are also required to put in place several procedures to anticipate and prevent their business being used by criminals to launder money and fund terrorism. The government have put together a document on how to prevent money laundering and terrorist financing if you’re an estate agency or property related business, this can be found here.
You must read the Regulations and the HMRC guidance if you are a regulated business to ensure that you are complying fully with the legislation. You will need to tailor our template policy to your specific business and practice in accordance with the guidance and Regulations.
Failure to comply with the Regulations can result in civil penalties or criminal prosecution. Senior managers and nominated officers can also be found personally liable for a breach of the Regulations.
Your anti-money laundering checklist:
- Register with HM Revenue and Customs for anti-money laundering supervision.
- Check that your buyers and sellers are who they say they are.
- Put in place internal controls and monitoring systems.
- Create a policy statement for your business.
- Keep records.
The Estate Agency sector is also facing regulatory changes, which will soon be implemented, and the proposed regulations appear to be focussed on the maintenance of core standards, training, education and service levels.
As more information is received about the regulation. AML & Compliance will develop with Estate Agencies, strategies to ensure they can obtain the necessary authorisation and maintain it.
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