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.
Property is often seen as a gateway to money laundering and it is essential that estate agents are aware of their duty in carrying out the right checks and reporting any suspicious activity. As a Board, we will be seeking to ensure a step-change in how the UK tackles economic crime and the role that the private sector can play in doing so.
The Fifth Money Laundering Directive expanded the scope of obliged entities within the property sector to include the letting agency sector for high-value transactions with a monthly rent of EUR 10,000 or more.
The new regulations introduced, create a level playing field in the sales and auctions market and we welcome this. The regulations have also been expanded to include the letting agency sector for high-value transactions with a monthly rent of 10,000 euros. Those letting agents who fall within the scope of regulated businesses and manage tenancies that meet the threshold will need to register for anti-money laundering (AML) supervision. Despite the HMRC’s online register not being operational until May 2020 letting agents will need to comply with the regulations from 10th January 2020 and if they’re found to be non-compliant with the regulation’s agents may face civil penalties or criminal prosecution.
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.
High Value Dealers must do more than just be wary of buyers paying with cash or using intermediaries. They need to actively train staff on implementing the Money Laundering Regulations.
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.
Supervision
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.
Improved guidance
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.
We continue to engage with the UK Government, including meeting with HMRC, the Home Office, HM Treasury and the Department for Business, Energy, Innovation and Skills (BEIS) to represent members and ensure that the Government’s Anti-Money Laundering and Terrorist Finance regime works for the property sector.
Related news and resources
AML risk management for art market participants
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.
Report finds HMRC ‘broadly’ fulfilling AML supervision role
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.
Estate and letting agents deemed as medium risk in money laundering report
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.
Propertymark pressure leads to improved guidance on Pooled Client Accounts
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.
NCA calls for changes in light of the Russia report
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.
Agents must keep Anti-Money Laundering practices in line as Britain leaves the EU
The future of Anti-Money Laundering (AML) enforcement has yet to be decided in the UK-EU talks and agents should ensure their current processes are up to date to be ready for any changes to AML laws as a result of Brexit.
