Money laundering regs – What do we buyers have to reveal?

by Readers Question

9:42 AM, 14th August 2020
About a month ago

Money laundering regs – What do we buyers have to reveal?

Make Text Bigger
Money laundering regs – What do we buyers have to reveal?

During purchase, it has been my experience that many estate agents ask for financial details from buyers. I remember one particular South West agent int he 90’s tried to give us the mandatory “financial assessment” BS – ie show our tied mortgage agent all your cards.

I have always found this hard to navigate as I understand their need to check buyer validity. However I am loathed to allow an agent to know anything about my finances, and often when we view a property we have not decided how we are going to finance it, as its often property dependant.

My accountant normally assists with a certified letter stating that we have access to the required funds.

We have not purchased for 2 years and now we are a little dismayed to discover that agents are “required by law” (agents words here) to know everything about where we are getting our money.

a) Is this true? The agent is not handling any of our money, in the past, the solicitor has had money laundering requirements, which is fine, but I fail to see the agents involvement other than signposting? (I have bought 22 properties since 1999, so I have a bit of experience, but still by no means an expert).

b) Is there a way around it for example by using solicitor/accountant to verify?

Many thanks

William


Share this article

Twitter Facebook LinkedIn

Comments

Neil Patterson

9:50 AM, 14th August 2020
About a month ago

Hi William,

Please see .Gov >> https://www.gov.uk/government/publications/money-laundering-regulations-2007-supervision-of-estate-agency-businesses

Estate agency business guidance for money laundering supervision

How to help prevent money laundering and terrorist financing if you’re an estate agency or property related business.

This guidance helps estate agency and property related businesses meet their requirements for money laundering supervision, including

customer due diligence
record keeping
reporting suspicious activity

1.1 Money laundering is how criminals change money and other assets into clean money or assets that have no obvious link to their criminal origins. Money laundering can take many forms, but in the property sector it can involve:

buying a property asset using the proceeds of crime, letting it or selling it on, giving the criminal an apparently legitimate source of funds
criminals hiding behind complex company structures involving multiple countries and multiple bank accounts to disguise the real purpose of a transaction and hide its beneficial ownership
a more direct method of paying an estate agency business or lettings agent a large amount and reclaiming it later
the money for a purchase resulting from a mortgage fraud operation

Many estate agency businesses may not handle client money but will have knowledge of both parties to a transaction, other intermediaries and how a purchase is funded. Other estate agency businesses, such as auctioneers may handle deposits.

1.2 Tax evasion is a criminal offence that can lead to money laundering, for example, the sale price of a property may be set below the Stamp Duty threshold by manipulating the price of furniture and fittings. Tax may also be evaded by hiding behind complex legal structures. The proceeds of crime include the proceeds of corruption and super-prime property is an attractive way for individuals to hide this money.
Terrorist financing

1.3 Terrorist financing involves dealing with money or property that you have reasonable cause to suspect may be used for terrorism. The funds and property may be gained from either legitimate or criminal sources. This may be small amounts.
Legislation

1.4 The primary UK legislation covering anti money laundering and counter-financing of terrorism is:

Proceeds of Crime Act 2002
Terrorism Act 2000
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (referred to in this guidance as ‘the Regulations’)
Criminal Finances Act 2017
Terrorist Asset-Freezing Act 2010
Anti-terrorism, Crime and Security Act 2001
Counter terrorism Act 2008, Schedule 7

Information on Sanctions can be found through:

HM Treasury Sanctions Notices
guidance
news releases

The Proceeds of Crime Act sets out the primary offences related to money laundering:

concealing, disguising, converting, transferring or removing criminal property from the UK
entering into or becoming involved in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person
the acquisition, either use or possession, or both, of criminal property

The primary money laundering offences apply to everyone, and you commit an offence if you know or suspect that the property is criminal property.

1.5 Under the Proceeds of Crime Act it is also an offence to fail to report suspicious activity and tipping off any person that you’ve made such a report. This applies to nominated officers and employees of businesses in the regulated sector, such as estate agency businesses.

This duty extends across the whole business, so an estate agency business which also does lettings must also submit suspicious activity reports where suspicion arises within lettings.

1.6 The Terrorism Act sets out the primary offences relating to terrorist funding. Regulated businesses, like estate agency businesses, must report belief or suspicion of offences related to terrorist financing, such as:

fundraising for the purposes of terrorism
using or possessing money for the purposes of terrorism
involvement in funding arrangements
money laundering - facilitating the retention or control of money that is destined for, or is the proceeds of, terrorism

1.7 The Criminal Finances Act 2017 make important amendments to the Proceeds of Crime Act, the Terrorism Act and the Anti-terrorism Crime and Security Act. It extends the powers of law enforcement to seek further information, recover the proceeds of crime and combat the financing of terrorism. Involvement in money laundering offences may result in either unlimited fines, a prison term of up to 14 years, or both.

It also introduces corporate criminal offences of failing to prevent the facilitation of tax evasion. These offences can result in corporates being found criminally liable for anyone providing services for or on their behalf who criminally facilitates tax evasion.

The defence that corporates can raise is that they had procedures in place to prevent persons associated with the business from aiding tax evasion. HMRC has published guidance to help businesses understand the offences and put processes and procedures in place.

1.8 The Regulations set out what relevant businesses like estate agency businesses, must do to prevent their services being used for money laundering or terrorist financing purposes. This guide focuses on what you must do to meet your obligations in relation to:

risk assessment
customer due diligence
reporting suspicious activity
record keeping
staff awareness and training

It also gives information on risk indicators within the sector and information about different types of estate agency businesses.

Neil Patterson

9:50 AM, 14th August 2020
About a month ago

Penalties

1.19 If a person or business fails to meet with the Regulations, they may face civil penalties or criminal prosecution. This could result in unlimited fines with a prison term of up to 2 years. You can find information on the penalties HMRC can issue.

Not meeting the regulations may lead to money laundering charges under the Proceeds of Crime Act 2002.

Neil Patterson

9:56 AM, 14th August 2020
About a month ago

If any agency is suspicious of a transaction they have a legal obligation to investigate further and or report it to the National Crimes Agency without 'Tipping Off'

Failure to report a reasonable suspicion is a criminal offence.

Dylan Morris

11:58 AM, 14th August 2020
About a month ago

Not sure what the concern is here. The last few properties I’ve purchased the selling agent asked how much I was financing on a mortgage and where the deposit was coming from. I scanned over my bank statement showing the deposit funds in my savings account. I didn’t find it an issue.

Smithy @hotmail

19:55 PM, 15th August 2020
About a month ago

With the last few purchases I made, I authorised my mortgage broker (works for a well known national company) to communicate with the estate agent.
The estate agent emailed him and he confirmed that I was taking out a mortgage and I had a suitable deposit. He did not disclose any actual figures but the estate agent was happy with that.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Winter Economy Plan leaves landlords out in the cold

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More