Fines for failure to identify beneficial owners

25th September 2018

Agents are falling foul of money laundering regulations by not having a process in place to identify third party ownership and beneficial owners.

2 simple examples come to mind;

• The property is owned by divorcing couple, one of whom remains in the property after the other has moved out. The agent is instructed by the remaining spouse, but the property is owned jointly. The agent must carry out Customer Due Diligence (CDD) on the other owner.
• The sale of a small portfolio of rental properties is being undertaken by a company with 3 directors. The ownership structure is split 50%/30%/20%. The owner of 50% of the business instructs the agent with permission from the other owners. The agent must also complete CDD on the owner with 30% of the shares as they are also a beneficial owner

In its guidance, HMRC advises you must complete Customer Due Diligence on beneficial owners in the same way as you do with instructing clients.

Ownership can be established through land registry and examining documents such as mortgage statements. (4.60)

While in most cases clients will confirm property ownership, where there is reason to doubt the information provided it is advisable to conduct your own independent checks.

For registered properties, Land Registry holds ownership confirmation in the OC1 Title document. This is split into 3 parts,

• Section A: A description of the property, including details of rights of access or restrictions
• Section B: Who owns the property, including correspondence details
• Section C: Charges against the property, including mortgages, covenants etc

an investigation of part B will confirm the owners.

Where the vendor is not the legal owner, you will need documentary evidence they are entitled to sell the property. This could be a lasting power of attorney, evidence of the executor(s) of the will in probate cases etc.

You may be instructed to sell by a company. In such cases you will need to identify the beneficial owners of the business; those who have 25% or more of the shares. If the business has subsidiaries you may need to do some digging to understand the shareholder statuses.

Much of this information is now available on Companies House (beta.companieshouse.gov.uk) by searching under “People” and “Persons with significant control” also known as the PSC register where beneficial owners are identified. However, some of this data is still incomplete and where subsidiaries hold over 25% of the shares, more investigation is needed.

CLICK HERE to view our guide to identifying beneficial owners

For a full definition of beneficial ownership, please see sections 4.25-4.33 Anti Money Laundering Supervision: Estate Agency Businesses 

 

Compliance in a Box provides a range of tools to enable estate agents to automate identifying beneficial owners and complete Customer Due Diligence (CDD).

Electronic checks save time spent trying to find (reliable!) sources to verify individuals, beneficial owners, property ownership and boundaries etc to demonstrate Know Your Customer (KYC) and comply with regulation.

Most importantly Compliance in a Box helps agents undertake and evidence their compliance; saving you and your customers time and streamlining customer experience.

Sign up below or contact Samantha Peacock (sam.peacock@landmark.co.uk / 01524 220013) for more information and to set up your account.

 

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