AML – Why Estate Agents need to do more than just document check

In 2022/23, there has been a significant increase in Anti-Money Laundering (AML) fines issued to estate agents. According to reports, estate agents now face an average penalty of £5,350. That’s a rise of almost 50% year-on-year.

What’s more:

• Dozens of estate agents have been fined more than £500,000 for breaching their AML requirements
• Since the introduction of AML supervision in 2017-18, estate agency businesses have been fined £2.5m in AML penalties.
• Some cases have seen record-breaking AML fines surpassing £200,000.

There are several reasons for the rise in AML fines within the estate agency sector, not least a changing regulatory landscape and the heightened scrutiny that comes with more stringent regulations. Nevertheless, to avoid expensive fines and reputational damage, estate agents must do more to ensure compliance in the fight against money laundering and financial crime. And there are three critical parts to this.

Firstly, tackling this issue and protecting agents requires a new mindset. Yes, AML compliance can feel time-consuming and inconvenient, but it’s also hugely important. Estate agents play a key role in safeguarding our economy from dirty money, and a shift in understanding is required to ensure that they grasp how vital their due diligence is to the wider AML process. Indeed, estate agents are often the first line of defence against criminals looking to legitimise their funds through property transactions, and only through their due diligence can we detect and deter suspicious activity at an early stage.

Secondly, successful AML compliance requires the understanding that due diligence is more than box-ticking. Agents must be up to date with the latest AML regulations and best practices. They must know how to carry out robust and comprehensive ID and document checks, and they must adopt enhanced due diligence, risk assessments, and ongoing monitoring. They also need to know how to identify and flag suspicious activities for further investigation.

Thirdly, estate agencies must provide their agents with everything they need to ensure AML compliance. Agents are under a significant amount of pressure, and even when they understand the importance of AML and what they need to do, it will remain an additional and unwelcome frustration without the right tools. As a result, firms must find ways to meet their AML requirements without putting more pressure on agents.

This includes investing in:

• Regular training to help property professional stay up to date on all things AML
• Technology to support the ID verification process
• Automated systems that spot and highlight red flags and potential discrepancies
• Regular audits and reviews to ensure policies and processes are compliant
• Clear monitoring processes that operate beyond the initial verification process
• Clear reporting channels for submitting Suspicious Activity Reports (SARs).

Crucially, AML compliance cannot be done once and forgotten about. Estate agents need to continually update and adapt their AML processes to stay ahead of evolving money laundering techniques. Only through a proactive approach will they ensure that their due diligence activities remain effective and relevant.

Today, estate agents play a pivotal role when it comes to AML; safeguarding the real estate market and the wider financial system. But rather than ticking boxes, firms must embrace a compliance culture to truly make a difference.

The good news is that estate agents don’t need to do this alone. 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.

Speak to our specialist compliance advisers today

Find out more about our Estate Agent AML Support Services, or get in touch today for an initial chat about how we can help. Email [email protected] or call 020 3051 2049