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Government moves to clarify AML requirements for Estate Agency

27th September 2016

HM Treasury has released a consultation discussing the implementation of the 4th Money Laundering Directive (4MLD). It invites feedback on a number of issues raised by the changes and touches on Brexit, acknowledging:

“Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the government will continue to negotiate, implement and apply EU legislation. The outcome of these negotiations will determine what arrangements apply in relation to EU legislation in future once the UK has left the EU.”

4MLD moves to clarify the position of lettings agents and money laundering, stating: “As concerns the obliged entities which are subject to this Directive, estate agents could be understood to include letting agents, where applicable.”

The consultation rightly identifies the lettings industry as a prime target for criminal activity with both landlords and tenants able to launder money through scam lets, mortgage/benefit fraud, accepting large payments as rent.

While there are no direct stipulations on lettings agents currently, the consultation poses the question as to whether landlords and tenants should be subject to CDD. It has long been the opinion of ETSOS since 4MLD was announced that landlords and tenants should be identified under the regulations in order to mitigate the risk of money laundering and terrorist financing.

For estate agents the consultation raises the prospect of carrying out CDD on both vendors and purchasers.

“In the UK, estate agents tend to act only for one of the parties to a transaction. As a result, the estate agencies often carry out customer due diligence on one of the parties to a transaction – their customer – who may be a vendor or a purchaser. The government has received representations that this is a weakness in the UK’s AML/CFT regime. This is because, for example, an agent acting for a vendor may not detect potential criminality on the side of a purchaser, and vice versa.”

In order to implement an effective anti-money laundering regime a fuller picture of transaction must be established in order to identify potential fraud. A number of high profile cases have hit the national press in recent months in which fraudsters impersonate owners in order to the perpetrate the sale of the property and direct funds to identified bank accounts via unknowing solicitors.

4MLD removes any distinction between foreign and domestic Politically Exposed Persons (PEPs). In cases where PEPs are identified, Enhanced Customer Due Diligence (EDD) must be undertaken. For domestic PEPs this will typically include establishing more primary data checks on your clients. Electronic checks will automatically enable you to achieve this by pre-selecting the level of risk posed to the business while title information will also provide you with details of ownership of the property to cross reference your ID against. For paper-based checks this will involve getting more primary evidence from your clients including passport, driving license, birth certificate/adoption certificate. For foreign PEPs certification of the ID by a bank/financial institution/solicitor or notary is required.

The full consultation document is available here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/553409/4mld_final_15_sept_2016.pdf

How will 4MLD affect your agency? Check out our guidance here: http://etsos.co.uk/the-implications-of-the-4th-money-laundering-directive-for-estate-agents/

 

Compliance in a Box is a pay as you go service that provides online AML checks, training for your staff, and storage for your records for the mandatory 5 years. We are also able to identify individuals on government sanctions lists and Politically Exposed Persons (PEPs). Through one easy to use online portal you can standardise your AML processes across your business. Contact us today on 01524 220013 or email compliance@etsos.co.uk to try Compliance in a Box FREE on your first 3 properties.

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