'Lack of clarity' concern over latest anti-money laundering rules

A technology company says that despite government attempts to eradicate money laundering in property transactions, agents and other industry professionals have been left with “a lack of clarity” about exactly what new regulations mean.

Accuity, which makes software products concerned with compliance and risk management, says the UK has seen “more than its share” of money laundering though property, prompting the government to announce new attempts to crack down on corruption. 

“The UK has seen more than its share, although the exact scale of illegal activity in the sector is difficult to estimate. Individuals or companies with a high money laundering risk are thought to own more than £4.2 billion of property in London alone” says Accuity in a report written for Estate Agent Today.

As a result of concern over the issue, the Department for Business, Energy & Industrial Strategy says over £180m worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption since 2004, with over 75 per cent of those properties currently under investigation having used off-shore corporate secrecy. 

The new draft legislation proposes the introduction of a public register, with foreign property owners forced to declare who ultimately owns their properties and non-compliance possibly leading to two years in jail and unlimited fines.

However, Accuity is more concerned with agents and other property professionals being left uncertain about compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

These require estate agents to carry out due diligence on their customers, and the beneficial owners of their customers if the client is a company, before entering into ‘a business relationship’ with them. 

The regulations say that a ‘customer’ means both the buyer and seller of a property – ‘entering into a business relationship’ is taken to mean the point at which the purchaser’s offer is accepted by the seller.

Accuity says: “This regulation was driven through parliament so quickly that the sector had little time to prepare. HMRC published interim guidance on its implementation but is consulting with the sector and other interested parties to develop this further. In the meantime, real estate professionals are left with a lack of clarity about exactly what the requirements mean.” 

It says that, for example, some property auction houses are asking all bidders to register and verify their identity before an auction, while others continue with the previous practice of asking for proof of ID only once a bid has been accepted.

However, Accuity adds that despite the confusion, the agency and property sectors in the UK are ahead of the curve in terms of the regulations and laws to try to combat money laundering through real estate, especially with the government’s commitment to introduce a public register of beneficial owners of companies buying domestic property by 2021.