Why is it relevant to...
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.
A high value dealer is a business (firm or sole trader, who or whose employees) that deal in goods or services and makes or accepts cash payments over the value of €10,000 (or its equivalent in another currency) whether that is in a single payment or a series of payments.
This includes chattels auctioneers where proceeds of crime can be 'cleaned' through purchases of high value items such as jewellery and cars.
Under the Fifth Money Laudnering Driective the rules are extended to persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of linked transactions amounts to €10,000 or more.
What are we calling for?
Private rented sector
Money Laundering Regulations should include Landlords and letting agents to reduce the risk of cash payments being used to ‘clean’ dirty money. The UK Government should remove the EUR 10,000 monthly rent threshold and set this at zero to create consistency and cover all tenancies let in the private rented sector.
Professional bodies should expand their roles to take on Anti-Money Laundering supervision rather than relying upon HMRC to act as a regulatory body for several diverse sectors. Self-regulatory bodies acting as supervisors understand their sectors and gather information about developing risks and anti-money laundering methodologies.
Alongside guidance on filling in a suspicious activity report, guidance from HMRC should include real-life examples from estate agents who have given reports to the National Crime Agency (NCA), to illustrate the process and explain the steps required. This would help to better explain to staff and MLROs about how long the process can take and what the outcomes can be.
Regulate the sector
Whilst the property sector remains largely unregulated, and without minimum standards, the industry is vulnerable to attack.
Increasing the number of Suspicious Activity Reports (SARs)
Staff in businesses affected by the must raise an internal report where they know or suspect another person is engaged in money laundering (whether a transaction has taken place or not). Propertymark is working with the National Crime Agency (NCA) to educate agents about when a SAR is necessary and the consequences for failing to do so.
How to make a SAR
If any staff know or suspect a potential customer is engaged in money laundering, they must raise an internal report to your MLRO. Basic examples of suspicious activity include; difficulty getting paperwork off the customer to complete due diligence checks, fake or incomplete paperwork, it difficultly establishing the beneficial owner, requests to pay via installments in attempt to bring payments under the thresholds.
The MLRO will need to assess whether there are grounds to pass the report onto the National Crime Agency (NCA). The NCA will determine whether you can proceed with the transaction. Contact HMRC for advice about money laundering and how to report suspicious transactions. If HMRC needs to contact you about anything confidential they will reply by phone or post.
Register of overseas entities
NAEA Propertymark has long called for a public register of overseas beneficial owners. Property is a high-risk sector for laundering money, with the true identity of owners often hidden through the illegal use of overseas shell companies. We believe:
- The Register should work alongside the requirements of the Money Laundering Regulations.
- The UK Government should seek to ensure that the Register does not operate on a self-certified basis.
- For the Register to be effectively administrated and monitored, Companies House needs to be properly resourced.
Giving evidence to the Treasury Select Committee
Following our written submission to the Treasury Select Committee’s Inquiry into Economic Crime, Mark Hayward gave oral evidence to MPs. Despite a ramping up of compliance activity since the introduction of the Money Laundering Regulations 2017 Mark argued:
- Agents were not given sufficient time to adapt to the changes.
- De-risking by banks is preventing some estate and letting agents from opening client accounts.
- Fines for those agents flouting the rules are not publicly being made known.
- Only interim guidance was available.
- There is a need for better guidance for reporting suspicious activity.
- The rules do not cover letting agents.
- There needs to more tools to help regulated agents understand enhanced due diligence.
- The public register of overseas companies owning property in the UK must be set up as soon as possible.
- There is no single Act of Parliament that sets out the UK financial sanctions regime.
Related news and resources
Estate agents, letting agents and auctioneers are among those being called upon to help improve the overall effectiveness of the UK’s anti-money laundering (AML) regulatory and supervisory regime.
Art market participants (AMPs) are currently assessed as high risk for money laundering, and to assist with identifying the risks, the UK Government has issued risk assessment information covering key areas for carrying out supervised business activities.
HMRC has published a self-assessment of its money laundering supervisory performance, which is broadly in line with the relevant Money Laundering Regulations and OPBAS sourcebook, however stating there was room for improvement.
The National Risk Assessment of Money Laundering and Terrorist Financing 2020 report was published yesterday, 17 December, increasing estate agents from low to medium risk as well as introducing letting agents as medium risk.
We welcome improved Joint Money Laundering Steering Group (JMLSG) guidance on Pooled Client Accounts (PCAs) following our response to their review and sustained engagement with HM Treasury and UK Finance to make it easier for letting agents to meet their legal obligations.
The Intelligence and Security Committee of Parliament issued their report on 21 July on Russia, highlighting the problems estate agents are faced with in combatting financial crime activity in property markets.