Would your anti-money laundering practices pass scrutiny by HMRC?
Under the Estate Agency Act 1979, firms that carry out estate agency services must observe good practices when it comes to their anti-money laundering (AML) and counter-terrorist financing requirements. Despite this, according to the National Crime Agency, billions of laundered capital floods through the country each year, with the UK property market one of the most vulnerable in terms of money laundering.
In response – and partly fuelled by increased media attention regarding this issue – the UK is adopting a more proactive approach towards estate agency AML compliance.
Which government body is responsible for supervising estate agent compliance with money laundering regulations?
Today, there are 25 AML supervisors in the UK, with different sectors having different overseers (despite some calls for a more streamlined system). HMRC is one supervisor of the money laundering regulations estate agents must adhere to.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into effect on 26 June 2017, and HMRC has responsibility for overseeing estate agent compliance with these.
As a requirement for trading under the 2017 regulations, if your business carries out any “estate agent business” as defined by the Estate Agency Act, it must:
- Register with HMRC for AML purposes
- Renew this registration every year.
For the purpose of the AML regulations, “estate agency” can include developers, construction companies, land agents, social housing providers, asset management companies, and commercial, online and high street estate agent businesses, amongst others.
It is a criminal offence to trade as an estate agency business without being registered. In addition to firms that do not register, those that do not renew, or pay the correct fee, face having their registration terminated – leaving them unable to continue trading lawfully. Despite this, in January 2022, five years after the AML rules came into force, research1 found that a quarter of estate agents had failed to register with HMRC.
Today, in addition to coming after firms who have not registered, the authorities are tightening up on those meeting their registration obligation, but failing to comply in other areas.
Consequences for a failure of estate agent compliance
A failure to adequately tackle money laundering supports criminal activity, so HMRC is understandably cracking down on agents that fall foul of their regulatory obligations. And there are consequences for failing to implement the AML regulations properly.
Over the last few years, many agencies have been fined between £5,000 and £12,000 for infractions. While high-profile businesses such as Countrywide and Purplebricks were hit with more substantial fines (£215,000 and £266,973, respectively) for sloppy compliance procedures.
Furthermore, since 2017, HMRC has been duty-bound to publish details of those businesses that have not complied with the regulations. Anyone can report unregistered businesses to HMRC, and in October 2022, the supervisor named 68 estate agents that had been fined a total of £519,645 for AML breaches. These fines follow the first ever prosecution of an estate agent for trading without having registered with HMRC.
The bottom line is that estate agencies found not complying with the rules face fines, reputational damage, closure, and even prison sentences. No longer is it sufficient to simply renew; instead, the onus is on estate agents to demonstrate that they have a robust and effective compliance framework.
Do estate agents have to carry out AML checks?
In short, yes. And to boost estate agent AML compliance, in June 2022, HMRC issued updated guidance for registered estate agency businesses. This guidance addresses critical areas of AML compliance, including:
- The responsibilities of senior managers when it comes to AML oversight
- The necessary risk assessment and policies, controls and procedures
- How to undertake customer due diligence
- How to report suspicious activity
- How to ensure adequate record keeping
- The importance of staff awareness
- The risks of non-compliance for estate agencies.
Crucially, the guidance makes it clear that HMRC expects the businesses it supervises to have completed an objective risk assessment to understand the risks they face, and to have robust risk and compliance policies and procedures in place to mitigate this risk.
Reviews, audits, and anti-money laundering policy template for estate agents
With AML compliance a priority, relevant businesses must now conduct an Estate Agent AML review against HMRC’s policies to identify necessary actions. This requires digging deep into the policies, procedures, and practices behind the annual renewal. And, for firms committed to compliance, Legal Eye can help.
Providing sound knowledge and practical solutions, our team of experienced associates will help you understand the regulations and industry requirements to adapt your processes and procedures via the following support services:
- Estate Agent AML Document Review
- Estate Agent AML Independent Audit
- Estate Agent AML Independent Audit including Certification
- Estate Agent AML Independent Audit Re-Certification (Remote access)
- Estate Agent AML Policy and Procedure Precedents
We also offer anti-money laundering training for estate agents. View our estate agent AML support services here.
Speak to our specialist compliance advisers today
Connect with us for the latest updates
Stay up-to-date with the latest in estate agent compliance and connect with us on:
- What can Estate Agents do if flagged for an AML audit?
- AML regulations for letting agents – what do you need to know?
- Five top tips to ensure letting agents don’t fall foul of AML rules
- Would your anti-money laundering practices pass scrutiny by HMRC?
- Estate Agents Act 1979 – What you need to know about compliance
- A drill down into The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
- Webinar: What does your business have in places for its AML compliance?