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Letting agents to comply with Money Laundering Regulations

Friday 10 January 2020

From today, 10 January, all letting agents who manage properties which, individually, yield an income of 10,000 Euros per month (or equivalent) or more, must now comply with regulations set out in the Fifth Money Laundering Directive.

All letting agents across the UK have 12 months to register, from May 2020, with HMRC if they meet the requirements. HMRC’s online registration system for letting agents won’t be operational until this time.

Compliance

All letting agents will need to comply with the regulations, despite not being able to register. Customer due diligence (CDD) checks will need to be carried out on any new tenants and landlords on or from 10 January 2020. Also, if an existing tenancy is renewed after this date, letting agents will need to carry out appropriate checks at that point on both parties.

Estate and letting business

Any letting agent who carries out sales and is already registered with HMRC for AML supervision and fall within the scope of the regulation, they will need to inform HMRC that they carry out lettings activity. This can be done once the online application process is up and running.

Preventing money laundering

Letting agents must take appropriate steps to identify and assess risks of money laundering and terrorist financing, establishing an up to date, written risk assessment and a written policy on how to manage the risk.

All businesses should appoint a nominated officer – Money Laundering Reporting Officer (MLRO) – who will be responsible for the letting agency complying with the Money Laundering Regulations.

All employees should be aware of the law too and business owners should provide regular training in how to recognise the deal with transactions that may be related to money laundering.

AML training

Customer due diligence

CDD must be carried out on both the tenant and landlord for any agency agreement with a monthly rent of 10,000 Euros (or equivalent amount) or more. This means identifying and verifying the customer, obtaining information on the nature of the business relationship and details of any beneficial owners. Carrying out CDD before establishing a business relationship should be done too.

Propertymark believes it is best practice for all letting agents, regardless of whether they fall under the definition of businesses with HMRC for AML supervision to carry out CDD on all their customers.

Checking identity

Penalties

If a business fails to comply with the Money Laundering Regulations, they may face civil penalties or criminal prosecution. This could result in unlimited fines and / or a prison term of up to two years.

Supervisory body

HMRC is the supervisory body for the property sector and their job is to promote the practice to combat, prevent and respond to money laundering, more information is available on their website (link).

David Cox

David Cox
ARLA Propertymark Chief Executive

Quote mark

The new regulations introduced, create a level playing field in the sales and auctions market and we welcome this. The regulations have also been expanded to include the letting agency sector for high-value transactions with a monthly rent of 10,000 euros. Those letting agents who fall within the scope of regulated businesses and manage tenancies that meet the threshold will need to register for anti-money laundering (AML) supervision. Despite the HMRC’s online register not being operational until May 2020, letting agents will need to comply with the regulations from 10th January 2020 and if they’re found to be non-compliant with the regulation’s agents may face civil penalties or criminal prosecution.

However, irrespective of whether agents fall under the definition of regulated businesses with HMRC for AML supervision, Propertymark recommends it’s best practice that all letting agents carry out Customer Due Diligence (CDD) on all their customers.

Propertymark FAQs and resources

Propertymark has produced some comprehensive FAQs plus and a recording of a webinar, which took place on 10 January, outlining the changes, is available to view. Fact sheets and guides will be available next week for Propertymark members to download.

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