When it comes to money laundering, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 places specific obligations on estate agents. Failure to meet AML compliance obligations can lead to fines, reputational damage, and even closure.
Nevertheless, billions are being stolen from the UK each year, in many cases due to a failure to carry out proper checks on both documentation and clients. Furthermore, according to the authors of one report, “almost half of property professionals are not improving their anti-money laundering processes”. There are three main reasons suggested for this inertia.
Do Estate Agents appreciate the importance of AML?
One reason given by the report’s authors for the sector’s failure to improve AML compliance is that estate agents are not taking its importance seriously enough. But is this the case?
Certainly, agents are under a significant amount of pressure. And, when trying to balance a plethora of tasks, AML can be an additional and unwelcome frustration. But that doesn’t mean that estate agents don’t understand the importance of AML. Instead, we would argue that the sector cares very much about getting their AML practices and policies right, but that help is needed to combat the threat without putting more and more pressure on agents.
Risk of fines
Agents risk the wrath of HMRC if they do not comply with money laundering regulations.
For example, last October, HMRC confirmed that it had fined 68 estate agencies a total of £519,645 for not complying with AML requirements. What’s more, research has found that the average fine issued to the sector for non-compliance is rising. With a 6% increase compared to the 2021/22 financial year, the average AML fine issued by HMRC to estate agents is now £3,815, with predictions that this will rise further in 2023. What’s more, estate agents account for the largest number, and almost half of all AML fines (45.4%) issued by HMRC since the introduction of AML supervision.
Putting AML at the forefront of running an Estate Agency practice is thus key to mitigating the risks and avoiding not only reputational damage but the impact fine can have also.
Effective tools and support
The third reason cited in the report that agents may not adhere to all the various AML requirements is that they don’t have the tools and knowledge to do so. Indeed, according to one study, carried out by First AML, almost half of property professionals have witnessed suspected money laundering over the past three years but have lacked the resources or drive to address it effectively.
In addition, there is a lack of understanding of what exactly is required regarding AML. With the laws constantly in flux, it can seem almost impossible to keep up with the current and pending legislation whilst managing the “day job”. Here, outsourced compliance support can be hugely beneficial.
At Legal Eye, we provide practical and affordable outsourced estate agent risk and compliance support to estate agents. 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.
Helping our clients build a robust compliance culture with everything they need to meet their evolving AML requirements, we free up estate agents so they can get on with the critical task of selling and letting properties.