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The implications of the 4th Money Laundering Directive on Estate Agents

7th June 2016

Politically Exposed Persons (PEPs)

A Politically Exposed Person is a person holding a prominent position in society that is susceptible to fraud or bribery; usually someone who holds influential positions such as politicians, members of the judiciary, senior members of the armed forces, and senior influencers at state owned industries. The new directive specifically states that in addition to the current need to identify foreign PEPs, domestic PEPs will also need to be identified.

While the definition of a PEP remain very fluid, the 4th Directive provides a little more guidance in suggesting that the definition now also includes parents, spouses (or equivalent), and children and their spouses/partners.  A PEP remains “at risk” after they cease to be in such a position for a period of up to 12 months, placing the onus on you to ensure you proactively remain vigilant and demonstrate you have accounted for such risk.

There is no easy way to identify a PEP; in most cases the practical way is simply to have them complete a self assessment declaration (a process that has the potential for fraud) or undertake an electronic check. Once a PEP is identified, enhanced Due Diligence must be carried out; your own internal risk-based assessment will dictate what measures your business will undertake. If your standard due diligence includes identification of your client (whether paper or electronic) and an understanding of the nature of your business relationship, typically enhanced due diligence will also include

  • ensuring that senior management gives approval for a new business relationship,
  • taking reasonable steps to establish source of funds,
  • undertaking and evidencing strict ongoing monitoring of the business relationship.

To download our self-assessment PEP form please click here

The critical undertaking is to evidence your AML activity. The regulator’s, the OFT and its successor HMRC, actions so far suggest they are not looking for reasons to fine agents, rather they are looking to support businesses who are genuinely making an effort to comply and put processes and procedures in place.

Critically no illegal funds need to have passed through your business for you to be culpable. It is also important to note that the regulations are almost unique in that there is a legal requirement to train staff and document records.

Compliance in a Box is the complete compliance solution for estate agents, providing you with the tools to undertake Customer Due Diligence (CDD) and enhanced CDD with the click of a few buttons. Our online AML checks advise of your client’s PEP status (including domestic PEPs) and complete all the advised checks to fulfil enhanced CDD, storing the records for the requisite 12 months for PEPs, and 5 years for money laundering.

For more information, and to try Compliance in a Box FREE for your first 3 properties contact Samantha Peacock on 01524 220013 or email her speacock@etsos.co.uk.

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