Not having a mortgage is the most common red flag to be raised by estate agents during anti-money laundering (AML) checks, new data has revealed.
More than one-fifth (22%) of red flags in completed source of funds (SoF) verification were raised because the buyer has no mortgage, according to a report on the online real estate market website Estate Agent Today.
Buyers receiving a gift to either partially or wholly fund a purchase account for the second highest number (20%), with issues also arising because of overseas funds (12%), high cash deposits (10%) and frequent cash deposits (9%).
Due to the high transaction levels, buying and selling property is one of the most common money-laundering methods.
While such markers are not direct evidence of illicit finance or fraud, estate agents should exercise extra caution when handling such transactions. Enhanced due diligence (EDD) will likely be required, and it may be necessary for real estate professionals to request additional evidence to ensure they meet their regulatory requirements.
Chief policy advisor at Propertymark, Mark Hayward, said: “Property is often seen as a gateway to money laundering and it’s essential that estate agents are aware of their duty in carrying out the right AML checks and reporting any suspicious activity.”
Estate agency is a regulated activity, and agents must comply with the Money Laundering Regulations 2017, enforced by HMRC, or run the risk of fines or prosecution.
Some of the main AML checks estate agents must undertake include:
- Register with HMRC. Businesses that carry out estate agent activity as defined under section 1 of the Estate Agents Act 1979 must register with HMRC. This can be done online. Agents will need to tell HMRC about their premises and pay any fees. All responsible persons must also pass a fit and proper test as well as the approval process.
- Customer due diligence (CDD). Estate agents are required to undertake checks to ensure buyers and sellers are who they say they are. This entails confirming their identity using an official document, such as a passport or driving licence and utility bill. EDD should be undertaken in situations that are high risk. This involves taking additional steps to identify and verify a client’s identity and conducting additional ongoing monitoring.
- Verification of funds. Estate agents must check proof of funds and verify the source of funds used in property transactions. They should also take the appropriate steps to understand a client’s overall wealth, for example, by checking bank statements.
- Policy statement. All regulated businesses, including estate agents, must produce, maintain and update a policy statement that stipulates their money-laundering controls and procedures proportionate to their risk. Businesses should have a Nominated Officer to receive reports of suspicious activity from staff and decide whether to report them to the National Crime Agency (NCA). Many businesses also require a Money Laundering Reporting Officer (MLRO).
- Staff training. Estate agents need to take the appropriate steps to ensure employees know the law relating to money laundering and that they are aware of their responsibilities.
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We can help organisations of all shapes and sizes from across different sectors undertake a review of their policies, controls, and procedures to ensure that they are compliant with AML regulations and, therefore, avoid any breaches.
A review of this nature provides valuable insight into a business when performed correctly. Along with an overview of risk, these crucial assessments also highlight issues within the business, so it is essential to undertake a proper review. All of a company’s building blocks must be considered, including its staff, clients, operations, and finances.
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Our services focus on businesses’ anti-money laundering and regulatory requirements through the implementation of effective policies, procedures, training, and consultancy. We also provide continued monitoring of staff and ongoing training to ensure that everyone within a business is aware of the latest requirements and complies with their responsibilities.
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