I always tell my training clients that the Anti-Money Laundering Regulations are probably one of the major pieces of Legislation that we must follow and be compliant with.

As an Estate Agency type business, property sourcers are legally required to register with HMRC for Anti-Money Laundering supervision.

We have significant responsibilities under these regulations and in order to be able to prove compliance, you must have a good understanding of what your obligations as a property sourcing business actually are.

Very briefly we are expected to…

Identify ‘Risk’ activities

You are expected to assess your business and clients and identify the activities that you carry out which carry a money laundering risk.  The activities that carry a risk must be broken down into ‘Low’ or ‘High’ risk activities.

Carry out Due Diligence on both Seller & Buyer

Since the implementation of the new Money Laundering regulations in June 2017 even high street Estate Agency businesses must carry out client due diligence on any buyer of one of their properties.

Property Sourcers are no different, we are expected to carry out a due diligence process on both the seller and the investor regardless of who is paying our fees.

You must have a written process for achieving the client due diligence i.e. cover…

  • How you will obtain Proof of ID
  • How you will obtain Proof of Address
  • How you will obtain Proof of Source of Funds

Create Policies and Procedures

It is now a legal requirement for you to have Anti-Money Laundering Policies and procedures in place for your sourcing business.  These will cover how you will fulfil your obligations under the regulations.

Basic policies should cover:

  • Assessment of Money Laundering Risk
  • Verifying ID
  • Know Your Client (KYC)
  • On-going Monitoring
  • Record Keeping
  • Internal Suspicion Report (SAR)
  • Disclosure to Authorities
  • Staff Training
  • Monitoring and Managing of Compliance

Create a Risk-Based Assessment

It is a legal requirement that you carry out a ‘Risk-Based’ assessment on your clients, this must be written and be able to be produced upon request.

Carry out Staff Training

Training for all relevant staff members is required at least annually.  That is that all members of staff who deal with any activities that your business assessment has highlighted must be training in what money laundering is and what your company processes are for assessing, working with and reporting any suspicious activity.

Training for every staff member must be recorded with details as to dates, level of course, level of pass and refresher due date etc.

Sourcing through other Agents

Even if you are sourcing a property through an estate, letting or other sourcing agents, do not trust that they will have carried out the relevant due diligence on the seller, errors are often made and you could be held equally responsible if you also fail to check both the seller and the buyer should anything go wrong with the sale! 

Quick Story to Highlight

A couple of years ago, in the South of England, a seller walked into a local estate agents office and said that they wanted to sell their property.

Not only did they want to sell but they also needed a quick sale as they were emigrating to Hong Kong and therefore required a cash buyer, but they realised that to achieve this they had to sell their property below market value.

You would think an estate agent’s dream client, or were they?

The seller’s property was worth in excess of £1.5m but to achieve the ‘fast cash sale’ they were happy to sell for £1m cash.

The estate agent, of course, took the property on and marketed, gaining a buyer very quickly.  The sale went through and the solicitor sent the cash from the sale of the property to the new Hong Kong bank account as requested.

All was well it seemed, until…

A couple of months after the completion of the sale the ‘Owner’ of the property returned from being abroad and found their home in the middle of a complete refurbishment!

Neither the estate agent, nor either solicitor had carried out full due diligence on the person who claimed to be the property owner, who turned out to be a very clever tenant!

Lesson learned, albeit expensively!

Penalties

  1. Failure to register: Fines of up to £5,000 each time you are caught
  1. Breaching Anti-Money Laundering Regulations: Fines: Unlimited and/or up to 14 Years in Prison

 

Don’t risk heavy fines or even the possibility of prison.  Make sure you’re compliant.  If you have any doubts and need further guidance please get in touch.  My book Property Sourcing Compliance can also help you navigate the regulations.

Tina Walsh

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