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By SmartSeach

Content Team, SmartSearch

OTHER FEATURES

Estate agents fined more than £3m for failing to register for AML

Estate agents were fined a total of more than £3m in the nine months to September 2023 for failing to register for money laundering supervision, and AML experts SmartSearch are urging those still not registered to act now or face unlimited fines and even prison.

Despite it being a legal requirement for estate agents to register for money laundering supervision, more than 300 estate agents were fined last year for failing to do so, while more than 3,000 are currently at risk.

There are almost 25,000* estate agents in the UK, and by law, they must register with HMRC for money laundering supervision. Any estate agent found to be trading without HMRC approval for AML supervision – or at least proof that they have made an application – face unlimited fines and could even go to prison for up to two years.

Between January 2023 and September 2023 HMRC fined 324 estate agents for money laundering failures. Overall, just 11 of these breaches were for AML failures – the vast majority (98%) were for ‘failing to apply for registration at the required time’.  In total, these breaches for failing to register totalled more than £3m – the average was just under £6,000 but some single fines exceeded £50,000.

There are three key points that agents need to know when it comes AML compliance:

  • HMRC issued £3m of fines between January and September last year to estate agents that had failed to register for money laundering supervision.

  • 1 in 7 estate agents remain unregistered and face unlimited fines or even imprisonment if they don’t act now.

  • SmartSearch can help estate agents comply with their HMRC requirements quickly.

According to analysis of the HMRC Supervised Business Register by AML experts SmartSearch, almost 3,400 estate agents are currently at risk of these severe penalties. That is because, out of the almost 25,000 VAT and/or PAYE-based estate agents in the UK, only 20,642 are actually approved for supervision while a further 943 have applied, leaving 4,323 estate agents at risk - that’s about 18% of the market.


Even when you take the 943 that are in the process of registering into account, there are still 3,380 estate agents that are not registered and haven’t even applied. That is 14% of the entire estate agency market - around 1 in 7 estate agents – that are putting themselves at real risk, not only of fines and prosecution for non-compliance, but also, of becoming money laundering victims, as Martin Cheek, Managing Director at leading digital compliance firm SmartSearch explains:

This data is hugely worrying as we can see thousands of estate agents are failing to even register for money laundering, let alone putting all the proper procedures in place that are needed to protect their businesses from financial crime.

“This lack of action means that there are currently more than 3,000 estate agents in the UK trading without being registered with HMRC, and based on the number that were fined last year, it is likely that at least a quarter of these will be fined over the next few months as a result.

“And while fines for non-compliance can be hugely damaging – not just financially, but reputationally, too – this risk is nothing compared with the risk of not having anti-money laundering procedures in place.

“Rules about registering for money laundering supervision are there for a reason, and that reason is that estate agents are at significant risk of being targeted by financial criminals.”

The UK property market is one of the most vulnerable sectors when it comes to financial crime, but sadly, not enough estate agents are taking that risk seriously.

Financial criminals use loopholes – such as the ability to buy property through an anonymous shell company – to abuse the system and as a result, millions of pounds worth of UK property is bought with dirty cash every year.

Buying property is also often the starting point for financial criminals, an access point into the UK economy, so estate agents have a huge responsibility to put the right procedures in place to identify financial crimes and prevent money laundering. Because, once these people have successfully bought property, they will find it easier and easier to continue to launder their dirty cash through the UK housing market.

Once registered for money laundering supervision, estate agents must then put proper risk-assessment procedures in place, which include:

  • Identification and verification

  • Identification of ultimate business owners (UBOs) for any corporate clients

  • Screening for sanctions and PEPs on individual customers and the UBOs of business customers

  • Enhanced due diligence where any risk is identified

  • Source of funds checks

  • Ongoing monitoring

And SmartSearch can help. Its award-winning digital compliance platform not only enables estate agents to quickly and efficiently run comprehensive checks on individual clients, but also run reliable and robust business checks on corporate customers. 

As well as verifying the corporate structure of the business, the check is also able to identify the owners and shareholders within that business, including the UBO. Once these individuals have been identified, the system runs full AML checks – complete with screening – on those names, giving estate agents a full understanding about the ownership of any corporate entities they wish to do business with.

However, says Martin, while the technology is out there to help estate agents meet AML requirements, it understandable that some estate agents – particularly smaller ones – might be reluctant to register with HMRC in the first place.

“The tech is there, and it can make AML easy, but as we can see from the data, many agents are still not even registering for AML, let alone putting the proper due diligence in place. And I think for some, this is because they are worried that, if they have been breaching AML rules for years, they will be stuck in a loop that they can’t get out of.”

“But meeting AML regulations can be quick and simple using our award-winning platform. Even agents that have been trading without running proper checks for years can achieve a compliant position.

“Our platform helps agents to verify, screen and monitor all clients, including corporates, as we are able to run Ultimate Business Owner checks on shell companies – so estate agents know exactly who they are working with. Not only will this satisfy HMRC in terms of meeting their requirements but will protect the business from financial crime.

“Plus, we also have a ‘batch upload’ service whereby we can retrospectively verify estate agents’ existing customer databases so that they can get compliant and stay compliant.”

The batch upload service in conjunction with the verification platform can offer help to:

  • Estate agents that are either newly registered for money laundering supervision, or waiting for approval, and need to run verification and screening checks on their entire customer database

  • Estate agents that have gaps in their compliance record and want to run new checks on a section of customers or their entire database

  • Estate agents that have run partial due diligence but not full verification – for example, they have not run screening checks for sanctions and PEPs

  • Estate agents with historical customer records that they need to upload quickly and efficiently from legacy systems

  • Estate agents that have merged with another business, or acquired another agency and have multiple customer files that need to be collated, checked, screened and monitored together

Martin concludes: “At SmartSearch we are on the side of estate agents. We are not here to catch them out, we are here to help them meet their legal obligations in the most efficient way possible.

“We know that there are estate agents out there concerned about registering because they have poor compliance records.

“With our batch upload service, they can get themselves ready for supervision and then going forward, our platform can provide everything they need to comply fully with AML regulations. We can even integrate our system with their existing ones for a much smoother onboarding process.

“With SmartSearch, estate agents have nothing to fear and should register for money laundering supervision as soon as they can or risk the consequences.”

Sources

*According to the ONS there are 24,965 estate agents in the UK

  • icon

    Why are they being fined?
    Why aren’t they being prevented from conducting business as an estate agent?

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