A more proactive attitude towards reporting money laundering is needed from the property industry
Back in December the UK received praise for our efforts to tackle the washing of dirty money from the Financial Action Taskforce, a global body who set the standards for combatting money laundering.
But that doesn’t mean that the property sector is off the hook. 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. The Government’s Flag It Up campaign has made it clear that estate agents need to be equip themselves to spot the ‘red flags’ of attempted money laundering, and report anything suspicious to the National Crime Agency.
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.
Estate agency businesses have a responsibility to ensure that they are registered with HMRC for AML supervision, and must ensure they comply with more robust AML rules in the form of last year’s Money Laundering Regulations 2017. These build on the obligations agents must meet within other legislation, including the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Criminal Finances Act 2017.
Agents must ensure they are fully compliant if they want to avoid hefty fines, or even prosecution. Research earlier this year1 found that 20% of the estate agents canvassed had received a fine for non-compliance with AML regulations, and that on average, the fine was just shy of £12,000.* Reputational damage should also be a concern. HMRC has recently started publicising a list of the names of businesses found to be non-compliant with the Money Laundering Regulations 2017.
Famously, it took a TV programme to comprehensively blow the lid on the lax approach some agents were taking. Posing as two foreign government officials with dirty cash to burn, undercover reporters filmed staff employed by several high-profile estate agencies helping them to buy properties – despite it being obvious the fake officials’ funds had dodgy origins.
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 be used to purchase property in the UK.
Although this scandal highlighted the risk to London’s property market, smaller agencies across the whole of the UK could be seen by criminals as an easier target if they don’t have the proper systems in place.
To combat this threat, effective due diligence needs to become as much a part of an agent’s job as negotiating a sale. It’s crucial now, more than ever, for the industry to promote a culture of compliance, so agents can protect themselves and their businesses against the threat of money laundering.
* Credas.co.uk 2018 (https://www.credas.co.uk/aml/average-agency-fine-for-aml-non-compliance-is-12k/)