What can Estate Agents do if flagged for an AML audit?

AML audits – what you need to know

Money laundering through property has become commonplace in the UK; with the sector a key target for criminals. Integrating dirty cash into the legal economy, lettings and sales can camouflage illicit funds. Once done, criminals enjoy the proceeds without fear of confiscation.

Under the Money Laundering Regulations 2017, estate agents must register with HMRC for money laundering supervision and perform AML checks to combat the high risk of fraud in property transactions.

Estate agents must also report any suspicions of money laundering. And as well as flagging homebuyers for potential AML breaches, estate agents must also raise an internal report where they know or have reasonable grounds to suspect that a colleague is engaged in (or is about to engage in) money laundering.

Flagging a potential transaction

Where a Suspicious Activity Report (SAR) is being raised, this should be done with the firm’s nominated Money Laundering Reporting Officer (MLRO). The MLRO is the person responsible for AML compliance within the business. Once a report is made, the MLRO will assess whether to pass the matter to the National Crime Agency (NCA). If you are a sole trader, you should report directly to the NCA.

The NCA will then determine whether the transaction can or cannot go ahead. Where the MLRO does not escalate the issue to the NCA, they must record their reasons for not doing so.

Things to consider when making a SAR include:

Why you’re suspicious
Details about the transaction
Whether the client is a suspect or a victim.

Estate agents who do not report suspicions of money laundering could face prosecution by HMRC

AML Red flags

In particular, estate agents must pay scrutiny to the following red flags:

Cash only buyers
Overseas buyers
A discrepancy between the buyer’s official income and the property value
Where a transaction involves a politically exposed person (PEP)
Individuals who have a high turnover of buying/selling properties
People who cannot/have not provided the requested information in a timely fashion
Fake or incomplete paperwork
Where there is difficulty establishing the Beneficial Owner of a property.

Simple steps to take after being flagged

Being flagged for an AML check can be a nerve-wracking experience – even if the individuals involved in the transaction are innocent. But there are steps estate agents can take to make the process easier for everyone involved.

Understand the process

Advise clients that there is nothing to worry about if a transaction is flagged. The sector requires stringent AML checks, and estate agents face significant penalties if they do not complete these. So undergoing an enhanced AML check is often a necessary part of the process.

Get everything in order

Help clients by ensuring all the necessary documentation is in order. This includes:

Providing all the required paperwork (including any additional information needed from overseas buyers). This should cover things like:
- Proof of ownership
- Proof of funds ( e.g. a paper trail to show the money used in a cash-only transaction is legitimate
- Proof of identity
- Supporting information (e.g. explaining why a buyer wants to sell after a short ownership period)

Making sure there are no errors in the paperwork
Making sure that the information provided is up-to-date
Providing everything in a timely manner.

By taking these simple steps, estate agents will help to reassure clients and expedite the process.

How to manage AML compliance going forwards

Tools and technology are available to help remove the burden of manual AML compliance. In addition, ensuring all employees are aware of the law and their obligations (via regular money laundering training) is a must.

Also, an audit is essential to help ensure estate agents meet their AML obligations. Regular risk assessments will determine the AML threats facing estate agents. Once identified, firms should put appropriate internal policies and procedures in place to help minimise the risk before a problem occurs. For example, robust Customer Due Diligence (CDD), that employees understand and adhere to, will greatly reduce the risk of criminals using the business for money laundering and terrorist financing.

There is no denying that this can be a time-consuming and often complex process. But the good news is there is an easier, and more effective way for estate agents to manage their AML compliance. Outsourcing removes the stress and burden from the AML process, and lets estate agents get on with what they do best.

Providing sound knowledge, practical solutions, and AML training, we help our estate agent clients understand the regulations and industry requirements and adapt their processes and procedures accordingly.