Were you one of the 68 estate agents who were fined a combined £520,000 in 2022 for not being AML (anti-money laundering) compliant? These figures were quoted by Malcolm Driscoll FCS Compliance when discussing what happens when agents don’t take their AML responsibilities seriously. “Everyone is responsible for playing their part,” says Malcolm. “AML compliance is integral to a property transaction and it’s not something agents can opt in or out of.” For many, AML compliance is a necessary distraction from core business – and it’s getting harder to administer.
Money laundering takes many forms and identifying illegal activity is not always easy – guidance changes and it takes time to get up to speed with new rulings. Malcolm Driscoll, FCS Compliance.
“Money laundering takes many forms and identifying illegal activity is not always easy,” adds Malcolm. “Guidance changes and it takes time to get up to speed with new rulings. A case in point is Trust Registration, introduced in September 2022, and a new sanction regime relating to the Russian invasion of Ukraine. This has added considerably to AML compliance workloads.” With one agent paying an eye-watering £53,400 penalty last year and the breach of Russian sanctions punishable by a fine of up to £1 million, non-compliance has the potential to hit agents where it hurts the most – their wallets.
An increasingly complex picture
Avoiding AML breaches are of paramount importance and Ben Robinson at Landmark Information Group feels agents will need to be super diligent this year, as transactions have become more complicated. “As well as dealing with trusts, overseas individuals and entities with complex or opaque ownership structures, statutory frameworks are increasingly making AML requirements ever stringent,” comments Ben.
HMRC directives and inspections are becoming more regular, which is escalating the demands and pressures upon estate agents. Ben Robinson, Landmark Information Group.
“In addition, HMRC directives and inspections are becoming more regular, which is escalating the demands and pressures upon estate agents.” If only there were ways for agents to ease the burden of AML compliance?
Outsourcing can be a very efficient way for agents to manage AML compliance but Ben says agents can be nervous about putting their customers in the hands of others. “The fear of losing control can be a worry. That’s why it’s essential for agents to do their homework when it comes to choosing an outsourced supplier to partner with.” More on the latter point further on.
Coming from a different angle to trust, Martin Cheek at SmartSearch thinks agents are aware that AML outsourcing exists but many are stuck in their old manual ways of working. “The case to go digital with electronic verification (EV) and robust sanction screening has never been so clear cut.” In 2022, SmartSearch surveyed more than 500 regulated firms, discovering almost 1 in 5 property firms said they had seen a rise in criminals attempting to launder money through their businesses. Shockingly, 1 in 16 said they had been the victim of money laundering in the past six months.
Many firms still manually verify the identity of customers through passports, licences or paper utility bills … but fake documents are getting harder to identify. Martin Cheek, SmartSearch.
Manual mistakes under pressure
Should these figures come as a surprise? Perhaps not, when the recent ‘Estate Agents of the Future’ report found that 58% of agents still believe existing manual AML processes are ‘prone to human error’. Emma Burdis from Iamproperty says the fact that criminals are becoming more sophisticated in their methods of concealing assets and ownership plays into the hands of agents, who may make miscalculations and slip ups when under pressure.
Changes to AML regulations over the years, coupled with the introduction of new initiatives, place greater emphasis and responsibility on agents. Emma Burdis, Iamproperty.
“AML is becoming harder to administer in house,” comments Emma. “The changes to AML regulations over the years, coupled with the introduction of new initiatives, place greater emphasis and responsibility on agents. They need to demonstrate they have conducted sufficient checks to establish that the client is who they say they are.”
In agreement is Harriet Holmes from Thirdfort: “Forward-thinking agents know that relying on human judgement alone for AML is risky. Manual processes have significant drawbacks, both in terms of the risks of checking documents by hand and the time it takes.”
Relying on human judgement alone for AML is risky. Manual processes have significant drawbacks, both in terms of the risks of checking documents by hand and the time it takes. Harriet Holme,s Thirdfort.
Without a degree of astute digitalisation, Martin adds that money laundering can be hard to spot: “Worryingly, many firms still manually verify the identity of customers through passports, licences or paper utility bills. Not only are criminals getting smarter but fake documents are getting harder to identify. Firms who have invested in electronic verification (EV) solutions are now seeing its cost and time-saving benefits.”
Manual verification is also a red flag at Credas, with Tim Barnett commenting on the sophisticated world of ID fraud. “We detect fraudulent activity on a daily basis and report these back to clients, the majority of whom are estate agents. Usually, the documents are well created and would likely be missed by agents manually reviewing them.”
Manually navigating PEP and sanctions lists for each and every transaction is time-consuming. And as lists can be updated daily, agents run the risk of using an outdated list. Tim Barnett, Credas.
PEP and sanctions
Tim also points out how the tedious world of PEPs (Politically Exposed Persons) and sanction lists – something that feels a world away from two up, two down transactions in Tranmere or Taunton – can leave agents exposed, especially during busy periods. “Manually navigating PEP and sanctions lists for each and every transaction is time-consuming. And as lists can be updated daily, agents run the risk of a complacent employee using an outdated list from yesterday rather than check for a new list today.”
Tim hits on a sentiment that Malcolm is keen to expand on – impunity. “There can be a reluctance to use AML specialists – either because of cost or sometimes just plain naivety. All too often we hear of agents who believe their business won’t be exposed to money laundering and if they were, they would have the experience to manage the situation themselves. Agents must realise that AML compliance has to be done and done properly – there are no corners to be cut.”
When ‘done properly’, it’s no surprise that AML compliance conducted manually by agents can add days, if not weeks, to transactions. The Credas team took a typical purchasing scenario and worked out 120 hours can be wasted when ID is checked in person and PEP/sanction lists are manually checked in-house.
Digital ID verification
With electronic verification and outsourced AML, transactions are not delayed by branch opening hours or the availability of staff, and there’s no presenting of passports or waiting for buyers to come back from holiday. Interestingly, Credas also found that when equating man-hours completed with cost savings, the average branch could save £2,500 a year by switching to digital ID verification.
Martin adds a direct comparison between manually checking ID in-branch and using electronic verification: “Electronic verification with SmartSearch can be carried out by agents after a brief walkthrough. By entering an individual’s name, address and date of birth, a platform completes a full AML check in less than two seconds, saving time and money. Of the firms we surveyed, 71% admitted it takes them days or even a week to process documents with existing in-house manual methods.”
Digital AML solutions make perfect sense for the risk-adverse, time-pressed agent but just like criminals, however, AML software and systems are becoming more sophisticated, as Harriet points out. “Even those agents who have adopted a traditional electronic AML solution can find themselves unprotected by choosing the wrong tech. Older, legacy platforms screen for PEPs and sanctions through database checks but this is just a fraction of the full AML picture. Agents should be adopting a one-stop solution that incorporates Know Your Client (KYC), AML and Source-of-Funds (SoF) verification.
“That said, recent tech developments – such as Open Banking, cryptographic and biometric verification, and real-time ongoing PEPs and sanctions monitoring – can help property businesses automate this collection. It’s important for the industry to adopt newer, more comprehensive digital tools that ensure property professionals are both compliant but not bogged down in too much admin.”
All aboard, with added AML
Thankfully, many of today’s AML and ID verification tools are helpfully bundled in with broader onboarding platforms for maximum automation and minimum admin. Compliance is one element of the Iamproperty Movebutler platform – a product designed to provide solutions to real-life agent problems.
“The property industry is facing challenging times and agents are working harder than ever to find clients, which can reduce focus on time-consuming client onboarding and diligence processes,” says the company’s Emma Burdis. “More than ever, our focus on anti-money laundering must remain a priority – using AML technology or outsourcing AML compliance can help agents to do both successfully.”
With Movebutler, agents can run online AML risk assessments with instant results and guidance, and run robust ID Checks (with PEP/sanctions as standard, and risk assessment guidance for full electronic confirmation and biometric identity verification) as part of a wider digital onboarding process.
At Sort Move, ID and AML checks are also done within its digital client onboarding service, called Fast-Start, “Fast-Start is an end-to-end bespoke digital portal that not only satisfies the compliance required, it also allows the client to complete all of their essential conveyancing paperwork within a secure digital portal,” says the company’s Morgan Lee.
AML and ID checks are processed with trusted third parties Hooyu and Yotisign, HMLR title checks are completed and all forms are digitally signed. Morgan Lee, Sort Move.
“AML and ID checks are processed with trusted third parties Hooyu and Yotisign, HMLR title checks are completed and all forms are digitally signed to ensure that the client is ready to start their conveyancing journey as soon as they have found a buyer, taking the pressure off the agent.”
“We needed to ensure that we were compliant with HMRC’s requirements but without the resources of a larger agency, we had to find an easy and cost-effective way to do this.
“Landmark’s AML Compliance service was the perfect solution, allowing us to undertake compliant ID checks for our clients as and when required. The portal is easy-to-use and reports are received quickly.
“The new Facial Recognition checks include full PEP and sanctions checks, and integration with Land Registry makes identifying beneficial owners simple and straightforward. Our clients find the Facial Recognition app intuitive and as they upload their own ID – it has streamlined the entire process for us.”
Vickie Stickler, Martin Diplock Chartered Surveyors.
Since joining SmartSearch, all our users have noticed how much the pass rate has increased.
“Iamproperty Movebutler is quick, easy to use and cost effective in the time it saves us over a manual process. From a business owner/management perspective, it is quick and easy to audit your files, and ensure your offices and staff are complying with current legislation. The training is also very useful to ensure all staff have regular CPD.”
Paul Wood, Director, Pygott & Crone.
“There are are many reasons why we chose SmartSearch to be our AML provider. One reason is the increased pass rate due to the dual-bureau system it has in place. The dual-bureau system means there is more chance we will be able to obtain a ‘pass’ result, so we can onboard our customers at the click of a button. Since joining SmartSearch, all our users have noticed how much the pass-rate has increased, which has significantly sped up our processes.”
Legal department, Persimmon Homes.