In an attempt to further address the estimated Â£24 billion a year ‘generated’ by organised crime, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into effect on 26th June 2017. The new regulations repeal and replace the Money Laundering Regulations 2007.
The changes are significant for property professionals, particularly those with connections to estate agency, including legal professionals involved in property transactions. The added definition of a business relationship includes the purchaser as well as the seller, from the point at which the purchaserâ€™s offer is accepted by the seller.
As key facilitators in a property sale, coming into contact with both seller and purchaser at an early stage, estate agents are well placed to identify suspicious activity. Managers may be personally liable if they do not exercise due diligence and take the necessary steps to protect their business.
HMRC, as the money laundering supervisor to the property sector, has produced guidance that reflects the amendments.
The Royal Institution of Chartered Surveyors (RICS) has been actively involved in the consultation process and, along with the Law Society and others, has made representations to ensure that the amended regulations are effective. The RICS has said it will robustly enforce action on those not acting with integrity and, in the interests of the public and the professional reputation of RICS-accredited members, it will report such issues to law enforcement agencies.
Huge sums can be â€˜cleanedâ€™ in just one transaction by property purchases in the UK and overseas. The impact on the property industry should be viewed as a significant area of risk.
All professionals working in in the property sector should be aware of the changes, in particular:
Risk assessment (Reg.18) must be carried out and be available to the SRA on request.
Policies, controls and procedures (Reg.19) provides an obligation for firms to share policies, controls and procedures to their subsidiaries and branches outside the UK.
Policies, controls and procedures: group level (Reg.20) must be applied to subsidiaries and branches in the UK and overseas.
Internal controls (Reg.21) an individual must be appointed as officer responsible for compliance and employees (and agents) should be screened prior to appointment and regularly thereafter.
Training (Reg.24) must be provided to relevant employees and agents, ensuring they are able to recognise and deal with money laundering and the financing of terrorism.
Prohibitions and approvals (Reg.26) applications must be made for approval by 26th June 2018, and will be approved unless the applicant has been convicted of a relevant offence.
Customer due diligence (Reg.27 and Reg.28) includes identity verification of a customer or person acting on their behalf.
Obligation to apply enhanced due customer diligence (Reg.33) includes identifying persons established in a state that is other than an EEA state, or whether â€˜the customer is a legal person or arrangement that is a vehicle for holding personal assetsâ€™.
Politically exposed persons (PEPs) (Reg.35) systems must be in place to determine whether a customer is a PEP or PEPâ€™s family member, and includes measures to be applied to a person for at least twelve months after they cease to be a PEP.
Record keeping (Reg.40) data must be deleted from due diligence records five years after completion, unless retention is required by or under any enactment or for the purposes of court proceedings.
Why not test your knowledge by taking the Law Society’s quiz: Think you understand Money Laundering?
See the governmentâ€™s Guidelines for Estate Agency businesses Anti-Money Laundering Supervision: Estate Agency Businesses which explains what businesses must do to protect themselves from the risks of money laundering and terrorist financing and how to report suspicious activity.