Most estate agents will be aware of the recent changes in the Anti-Money Laundering regime. For estate agents this means that they must now:
Carry out a risk assessment for their business; Create a mitigation strategy with policies and procedures to limit the assessed risk; Make sure that staff are properly trained in the new regime; Develop a process to risk assess all new transactions; Carry out the appropriate level of due diligence.
It is particularly important for estate agents to understand that the new requirement to risk assess and carry our due diligence now applies to property purchasers as well as vendors. The vendor must be assessed and checked at the start of the business relationship, that is when the property is put on the market to sell, while a prospective purchaser must be assessed and checked prior to any offer (verbal or formal written offer) being passed to the vendor. If sealed bids are being used then it will be necessary to carry out due diligence on the maker of any bid before it can be opened.
It is also important to understand that due diligence is much more than a simple ID check. Due diligence means asking for information about the buyer’s source of funds and ensuring that it makes sense and matches other things you know about them. For example, a person who has told you that they need a mortgage for a small two bedroom house who then comes back a week later to say they are a cash buyer for a five bedroom mansion is someone who is going to need very careful consideration. It also means looking out for persons who might be subject to sanctions or who might be connected with government bodies, both within the UK and beyond.
Letting agents are currently not covered by the new legislation. Currently, the only lettings that are covered by the AML regime are situations where a longer lease with a capital value is being purchased. Most people would think of this as estate agency work anyway but the government thinks of this as lettings work for the purposes of AML regulation. The government is intending to review the evidence for applying AML regulations more widely in the lettings sector towards the end of 2017 but currently, they are not convinced that this is appropriate.
Estate agents must have regard to the guidance produced by the HMRC for the estate agent sector. Frustratingly, this remains in draft form despite the new regulations being in force from 26 June 2017 and, as an illustration of this, they guidance has just been tweaked slightly. The changes are minor and make clearer what classes of person should be treated as Politically Exposed Persons (PEPs) but the fact that this is not yet settled will lead to uncertainty for estate agents grappling with the changed regime.