Forget the near comedy of TV documentary ‘From Russia with Russia’ – the government is urging estate agents to play their part in tackling the growing levels of much more subtle money laundering in the UK.
Back in December the UK received praise from the global anti-money laundering watchdog the Financial Action Taskforce for the nation’s efforts tackling the laundering of ‘dirty money’.
But that doesn’t mean that the property sector is off the hook. The government’s recent Flag It Up campaign has made it clear that agents need to work harder to spot the ‘red flags’ of attempted money laundering, and report anything suspicious to the National Crime Agency.
>Find out how to submit a Suspicious Activity Report.
Along with the other reporting professionals, like accountants and lawyers, estate agents are “gatekeepers”, whose professional services can be exploited by those seeking to launder money through the UK.
Busy estate agents may see their regulatory responsibilities as ‘box ticking’ exercises that require them to employ a minimum level of due diligence to escape a slap on the wrist. But going forward, this attitude isn’t going to cut it if agents want to avoid hefty fines, or even prosecution.
Research earlier this year found that 20% of the estate agents canvassed had received a fine for non-compliance with Anti Money Laundering (AML) regulations, and that on average, the fine was just shy of £12,000.
But although these regulations focus on ‘compliance’, AML is really about agents protecting themselves from being exposed to criminal exploitation.
Famously, it took a TV programme to comprehensively blow the lid on the lax approach some agents were taking to AML compliance. Posing as two Russian government officials with dirty cash to burn, undercover reporters (pictured, right) filmed staff employed by several high-profile estate agencies helping them to buy properties – despite it being obvious the fake officials’ funds were as dodgy as their fur coats.
But, although the TV show made headlines around the world, attempts to launder money in the UK through property purchases are often much more subtle.
Blatant money laundering may make good TV, but it’s not the reality on the street.
The Panama Papers scandal uncovered the efforts of criminals to hide the identity of ‘beneficial owners’ through complex corporate structures, creating shell companies which could then used to purchase property in the UK. This scandal also highlighted how much London’s property market, in particular, is prized by those wishing to launder dirty money.
To tackle this, effective due diligence needs to become as much a part of an agent’s job as negotiating a sale. Agents must also ensure they comply with more robust AML rules in the form of last year’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
These are on top of the obligations agents must meet within existing legislation including the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Criminal Finances Act 2017. The new law implements the Fourth EU Money Laundering directive, requiring both considerably beefier in-house compliance activity and greater vigilance from frontline staff.
HMRC requires most businesses offering estate agency services to be registered with it for AML supervision. Find out if yours needs to comply (lettings-only businesses don’t need to).