The Government thinks that the risk of money laundering taking place in estate agency is on the rise, especially in high-end lettings - the top 5% of lets in value. However, there is a lot of uncertainty as to the full scale of money laundering in lettings says ARLA Propertymark.
Propertymark says the level of compliance with AML regulations is still very low, with its assessment for 2019 stating that only half of estate agents were registered, even though they may face civil penalties or criminal prosecution. There are penalties of unlimited fines and / or a prison term of up to two years.
All employees should be aware of the law on AML, the estate and letting agent'�s professional body says, and it advises business owners to provide regular training in how to recognise and deal with transactions that could involve some form of money laundering.
The organisation also advises letting and estate agents to carry out what it terms Customer Due Diligence (CDD) on both tenants and landlords before any business relationship is established, particularly for high-end lets. But interestingly, it recommends carrying out AML related CCD as a matter of routine for ALL lettings.
It will be a legal requirement for any agency agreement with a monthly rent of 10,000 Euros (or equivalent) or more. This involves agency staff in identifying and verifying potential tenants and landlords, obtaining information on the nature of the business relationship, and finding details of any beneficial owners.
So, Propertymark recommends that best practice for all letting agents, regardless of whether they come under the HMRC definition of businesses to be regulated for AML supervision, is to carry out CDD on all their tenants and landlords.
HMRC is the supervisory body for AML in the property sector and its role is to promote safe practice with regard to AML to 'combat, prevent and respond'� to money laundering.
David Cox, ARLA Propertymark Chief Executive says:
'The new regulations introduced, create a level playing field in the sales and auctions market and we welcome this. The regulations have also been expanded to include the letting agency sector for high-value transactions with a monthly rent of 10,000 euros.
'Those letting agents who fall within the scope of regulated businesses and manage tenancies that meet the threshold will need to register for anti-money laundering (AML) supervision.
'Despite the HMRC'�s online register not being operational until May 2020, letting agents will need to comply with the regulations from 10th January 2020 and if they'�re found to be non-compliant with the regulation'�s agents may face civil penalties or criminal prosecution.'�
David Smith, solicitor and partner at JMW Solicitors, says:
'Guidance relevant to lettings agencies remains outstanding, so the regulations are very unclear as to when the obligations to do checks apply in relation to prospective tenants. It is inevitable that prosecutions will be taken against estate and letting agents. However, given the lack of full guidance, the unclear approach in the regulations, and the uncertain level of risk in the risk assessment, such prosecutions are not the easy case that the Government might think.'�