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By Mike Ward

Executive Chairman, Armalytix


Does it really take a war to improve AML checks?

It’s taken Russia’s invasion of Ukraine for the UK to finally take a much-needed step in the right direction to stop the flow of dirty money flowing through the ‘laundromat’ that is the London property market. The long-awaited Register of Overseas Entities (ROE), an idea first announced by David Cameron over six years ago, was finally implemented on the 1st August 2022, and it couldn’t have come soon enough.

However, despite it being in the pipeline for over six years, the ROE is not without its critics, who think that it doesn’t go far enough and are concerned that it was rushed through by the government, rather than following a slower, but smoother implementation. Loopholes have already been spotted, including how if someone owns less than 25% of a company’s shares, they won't have to disclose this. This leads to the question; will the ROE have the desired effect of helping those in the property world?

Foreign ownership in London has increased three-fold since 2010, and with the ROE coming into effect, estate agents have new regulations they must follow, or risk reputational or financial damage. Overseas entities will need provide evidence to an ‘Agent’ of beneficial ownership and legitimacy. The agent will then have to make sure that they complete their own verification checks which they will have to submit to Companies House. If this is then successful, the overseas entity will be added to the ROE, allowing them to buy and sell land in the UK.


The problem for estate agents lies in the fact that verification for ROE purposes is a very different task from the risk-based approach to due diligence that they must take under the current money laundering regulations. There is a confirmed list of professions who may become approved ROE agents, including auditors, insolvency experts, external accountants and tax advisers, as well as independent legal professionals, credit institutions and financial institutions.

While estate agents and conveyancers may also complete verification checks and become ROE agents, recent advice from the Law Society counselled conveyancers to avoid becoming agents. A large majority of conveyancers and estate agents will, therefore, decide not to become ROE agents, but will also decide to only work with a preferred list of ROE agents.

Above all, there needs to be rigorous vetting process on ROE agent applications, otherwise, there is a possibility of abuses creeping into the checks, with unscrupulous third-party ROE agents incorrectly validating overseas entities' applications. This would bring the whole purpose of the Register crumbling down.

Further, the changes will affect all estate agents, even if they aren’t acting directly for an overseas entity. Across the house buying and selling chain, if there is an Overseas Entity at any stage, then this will increase the risk that chain could collapse if that OE fails to register. From a commercial standpoint, estate agents will need to check that their terms of business are watertight, ensuring that in the event that an Overseas Entity has failed the checks or has been unable to register, estate agents are covered and can protect themselves from any liability.

To help prevent this situation from arising, estate agents may wish to start at the beginning, ensuring effective and reputable ROE agents are used by the OE who they can trust to take care of the necessary checks so as not to put the transaction at risk

However, despite the increased workload for everyone across the chain to confirm that overseas entities are who they say they are, the ROE has the potential to revolutionise the house buying and selling process.

With regards to overseas entities, it will make AML checks easier and more transparent for estate agents and conveyancers, as it requires overseas owners to annually update their information, discouraging foreign owners from using the London property market for money laundering purposes.

It’s definitely not perfect, but it is a step in the right direction.

*Mike Ward is Executive Chairman at Open Banking platform Armalytix


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