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What would HMRC do? Blog 3

6th February 2018

There is still widespread confusion amongst estate agents when it comes to compliance with the Money Laundering Regulations according to Landmark’s Estate Agency Services Division.

Recent research undertaken in the form of a short survey has shown that agent’s still struggle with applying practical solutions to remain compliant.

In a series of short blogs, Landmark’s Ben Robinson talks through the results of the survey. In our third blog we discuss what to do when it Customer Due Diligence (CDD) cannot be completed.

In such cases the guidance can be confusing. Ultimately any decision on next steps if CDD cannot be completed lies with the business. Firstly, if CDD cannot be completed, the regulations clearly state you must “not deal with certain persons or entities if you cannot carry out customer due diligence, and consider making a suspicious activity report.” (4.1)

Secondly an internal process should be triggered which refers the case to the firm’s Money Laundering Reporting Officer (MLRO) where

… there are reasonable grounds for having knowledge or suspicion, that another person is engaged in money laundering, or that a terrorist finance offence may be committed. (5.1)

It is then the MLRO’s responsibility to

… consider all internal reports. The nominated officer must make a report to the National Crime Agency (NCA) as soon as it is practical to do so, even if no transaction takes place, if they consider that there is knowledge, suspicion or reasonable grounds for knowledge or suspicion that another person is engaged in money laundering, or financing terrorism. (5.1)

It may not be the case that the MLRO completes a Suspicious Activity Report (SAR) in every case… we must remember the objective here is to identify and report the risk of money laundering.

Critically it must never be made known that an individual has failed CDD… this is known as “Tipping Off”.

It is a criminal offence for anyone to say or do anything that may ‘tip off’ another person that a suspicion has been raised, or that a money laundering or terrorist financing investigation may be carried out. It is also an offence to falsify, conceal or destroy documents relevant to investigations. (5.21)

“Tipping Off” carries a penalty of up to 5 years imprisonment and/or a fine.

HMRC guidance outlines when an MLRO might consider submitting a SAR:

These are some of the questions to consider in deciding whether or not to submit a suspicious activity report when you deal with new transactions:

checking the seller or buyers identity is difficult

the seller or buyer is reluctant to provide details of their identity or provides documents which may be fake

the seller or buyer is trying to use intermediaries to protect their identity or hide their involvement

you must go through several legal entities in order to identify the beneficial owner or you are unable to identify whether there are any beneficial owners

no apparent reason for using your business’s services – for example, another business is better placed to handle the transaction

their lifestyle does not appear to be consistent with your knowledge of their income or income does not appear to be from a legitimate source

they are keen to buy or sell quickly at an unusually low or high price for no legitimate reasons

part or full settlement in cash or foreign currency, with weak reasons

they, or associates, are subject to, for example, adverse media attention, have been disqualified as directors or have convictions for dishonesty. (5.23)

Link to HMRC guidance: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/628696/Estate_Agency_Businesses_Guidance_.pdf 

 

MISSED OUR FIRST 2 BLOGS? CATCH UP HERE

Blog 1: http://etsos.co.uk/what-would-hmrc-do-blog-1/

Blog 2: http://etsos.co.uk/what-would-hmrc-do-blog-2/

 

Electronic checks from Compliance in a Box fully comply with the obligations outlined.

A clear, interpreted result is provided in each case to enable the agent to make an informed decision about proceeding with the transaction.

Find out more about how you can use electronic checks to demonstrate Customer and Enhanced Due Diligence with pay-as-you-go checks from Landmark. No contracts, tie-ins, set up or data fees. Contact Samantha Peacock on 01524 220013/ sam.peacock@landmark.co.uk or sign up below

Find out more

 

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