Around half of all estate agencies selling homes for £5m or more have not even registered for anti-money laundering processes, and/or have failed to register with HM Revenue & Customs.
The revelation comes in a new national risk assessment on money laundering and terrorist financing in the UK.
Mark Hayward, the new chief policy adviser at Propertymark, says: “The publication of the report fires a warning shot to estate and letting agents that the perceived level of money laundering in the sector risk is rising.
“It is shocking to see that some estate agents, especially in the top end of the market, have failed to register with HMRC on AML. This in itself is a criminal offence, and we urge all members to adopt the correct policies and procedures.
“Propertymark has mechanisms in place to ensure members adhere to the highest AML standards and urge everyone to ensure they are compliant. Reports like today’s will increase focus on our sector and damage trust in agents, that is why it is so important that we are playing our role in stamping out money laundering from the housing market.”
HM Treasury and the Home Office say action is now ongoing against these businesses but the report is generally strongly critical of the poor performance of the estate agency sector in the fight against money laundering and possible terrorist financing.
The report is also critical of online agencies and those with what it calls an “over-reliance” on PropTech products claiming to conduct appropriate checks.
“Overall, estate agency businesses (EABs) continue to have a lot of weaknesses in their anti-money laundering and counter-terrorist financing (AML/CTF) controls, limiting the mitigations against the risk of money laundering in the sector.
“Common failings are the lack of bespoke policies, controls and procedures aligned with an appropriate risk assessment of each firm’s clients. This includes a lack of consideration of property location on the risk (e.g. failing to recognise that higher priced London property is at higher risk of money laundering).
“This is particularly true of EABs that operate solely online, with no face-to-face relationship with clients. Likewise, many EABs do not conduct sufficient ID checks, particularly on customers based overseas.
“Some EABs, have an overreliance on ID checking software which they do not fully understand. HM Revenue & Customs (HMRC) has found many firms who assume that the software they use automatically checks for PEPs and sanctioned individuals without realising that this functionality is only available via the premium version of the package, which the EABs have not purchased.
“HMRC has identified that larger EABs with multiple branches usually have the right policies and risk assessments in place but fail to adequately audit their branches for compliance.”
You can read the full report here