The government has updated its guidance for estate and letting agents on their anti-money laundering obligations, including how to undertake a risk assessment and conducting customer due diligence checks.
The UK government has updated its guidance on anti-money laundering regulations for estate and letting agents, amidst reports that global tensions have seen a rise in "questionable funds" from international sources investing in property in the UK since 2016 - now standing at £6.7 billion.
Estate and letting agents who receive rent payments equivalent to €10,000 or more per month for a property have been subject to anti-money laundering legislation - the Fifth Money Laundering Directive which falls under The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 - since 10 January 2020. Here's an overview of the top things that agents need to know.
Registering with HMRC
Agencies that are subject to the anti-money laundering regulations should also be registered with HMRC, and need to apply to register for HMRC before they can "carry on as a relevant business".
"Key personnel" at each agency would need to pass a test before the agency can register, and agents should avoid using language that suggests the registration is an endorsement of their services.
Penalties for non-compliance
Those that fail to register with HMRC risk penalties which will be calculated on a case-by-case basis. The regulatory body will take into account your reasons for not having registered, whether or not you told HMRC that you’re not registered, and whether you have had any previous warnings or penalties.
Agents will also be required to pay certain fees upon registration, covering the registration fee for each premises and an "approval process" fee for each person tested.
Letting agencies still need to meet certain responsibilities under money laundering legislation, including carrying out a risk assessment and customer due diligence on agreements with landlords and tenants where, for a period of a month or more, the rent during at least part of that period is equivalent to a monthly rent of €10,000 or more.
Carrying out a risk assessment for money laundering
You'll need to assess all the ways that your business could be exposed to money laundering and terrorism financing risks and put processes in place to deal with them.
You'll also need to stay on top of risk information and emerging trends from sources such as the National Risk Assessment and HMRC’s risk assessment, and update your procedures as necessary.
Your assessment should include the risks posed by your:
- customers and beneficial owners (the beneficial owner is the person who’s behind the customer and who owns or controls the customer, or it’s the person on whose behalf a transaction or activity is carried out)
- services or transactions
- financing methods
- delivery channels, for example non face-to-face services
- geographical areas of operation, including sending money to, from or through high risk third countries (for example countries identified by the EU or Financial Action Task Force as having deficient systems to prevent money laundering or terrorist financing)
Your risk assessment must be in writing and subject to regular review. They need to reflect changes to your business and the operating environment. The risk assessment must be given to HMRC when requested. Learn more about carrying out a money laundering risk assessment.
Carrying out customer due diligence or "know your customer" checks
You will need to complete customer due diligence on all of your customers and beneficial owners. Customer due diligence - often referred to as "know your customer" or KYC checks - is the process of identifying your customers and confirming they are who they say they are, usually by obtaining their name, an official identification document, and their residential address.
- when you establish a business relationship with a customer
- when you suspect money laundering or terrorist financing
- when you have doubts about a customer’s identification information that you obtained previously
- when it’s necessary for existing customers - for example, if their circumstances change
You will also need to identify the ‘beneficial owner’ in some situations, for example if someone else is acting on behalf of another person in a particular transaction, or if you need to establish the ownership structure of a company, partnership or trust. Learn more about carrying out customer due diligence.
This article is intended as a guide only and does not constitute legal advice. See gov.uk for more information on anti-money laundering regulations.
