With a huge increase in reports of questionable funds being poured into investments in the UK property market, the government has now tightened anti-money laundering policies for estate and letting agents. An enormous £6.7 billion has been invested in UK properties, which the Government believe may have come from 'questionable' and criminal sources since 2016.
Regulations detail that estate and letting agents must conduct AML checks on properties that demand a monthly rent equal to or higher than £10,000. These tenancy agreements must abide by the anti-money laundering legislations detailed under The Money Laundering and Terrorist Financing Regulations 2019. This has been written into policy since January 2020.
The Government guide for money laundering supervision for letting and estate agents were last updated at the end of July on the Government website. Here's an overview of what is expected of UK agents.
HMRC Registration
All agencies that fit these requirements must be registered with HMRC before they can continue to run. Those filling instrumental roles in the business are also subject to a test they must pass before the agency can register under HMRC. Letting agents will be reprimanded if they try to suggest that their registration with the HMRC is an official endorsement of their business and the services they offer.
Non-Compliance
Lettings and Real Estate agencies that do not uphold these basic regulations risk potentially huge penalties determined by the relevant governing bodies, which will be assessed on a case-by-case basis. Factors determining the penalty will include the logic behind non-registration, whether you made HMRC aware of non-registration and whether there are any previous offences.
On top of this, agents are under obligation to pay specific fees when registering each premise, and additional approval fees for each person who goes through the HMRC test.
Additionally, letting agents must still meet the requirements under money laundering supervision legislation implemented by the government. Carrying out a fraud risk management policy and comprehensive due diligence upon each agreement between a tenant and landlord where the monthly rent meets or is over the threshold of £10,000 makes up the bulk of this requirement.
AML Risk Assessment
The AML risk assessment identifies any and every way that a business could be susceptible to money laundering and terrorist financing. Policies are then put in place surrounding this to avoid and minimise the possibilities of exposure.
It is absolutely vital that businesses are updating their risk assessments with the emergence of new and evolving risks using the National Risk Assessment and HMRC’s guidelines.
The assessment should cover risks arising from:
Customers and beneficial owners
Transactions
Methods of payment
Contact platforms
Areas of operation
The risk assessment plays an essential role in protecting the business and therefore must be under constant review and reflective of the changes in the global and business environment, ready to be given to HMRC whenever requested.
Customer Due Diligence
Customer due diligence is a necessity which identifies your customers, confirming who they are and obtaining their personal information such as their address and official ID. In the financial services world, this is often called KYC (Know Your Customer) policy. It must be enacted at a number of stages which include: when establishing a business relationship, when the customer is under suspicion of money laundering, doubts about previous information are given and when customer situations change.
Anti Money Laundering Checks make up a proportion of Homeppl's advanced referencing solution that is used by some of the UK's largest agencies.
Through conducing AML and KYC checks, we have been able to uncover a sample of fraudsters who have tried to rent properties in the UK for nefarious reasons. This not only stops illegal activity in its tracks but catching these activities early means we save our clients a great deal of paperwork hassle and legal proceedings. This is one of just 150+ fraud detection tests that separate Homeppl from the rest of the referencing solutions on the market. We simply go deeper and have unique technology that can catch 100% of fraud in every application.
All in all...
With reports of a huge spike in the use of questionable funds being poured into the UK property and rental markets, the government has updated their guidelines on AML and customer due diligence checks for agencies to follow & prevent themselves from falling victim to financial crimes and illegal financing.
Real Estate risk management is incredibly important during a cost of living crisis and all agencies must do all they can to prove they have conducted efficient & thorough checks and risk assessments at relevant points of business to ensure they are doing their part in prevention. If they fail to do so they are likely to be hit with heavy penalties subject to the specific circumstances surrounding each case.
