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Estate agents are being fined millions for failing to prevent money laundering – but the fines are 'not publicly being made known'

Estate agents are being fined millions for failing to prevent money laundering – but the fines are 'not publicly being made known'

By Camilla Hodgson

LONDON — Estate agents are being slammed with "business busting" fines under new anti money laundering regulations, according to the head of the National Association of Estate Agents (NAEA), but the amounts are not public.

Tighter regulations were introduced in 2017 under the Money Laundering Regulations, which require estate agents to do anti-money-laundering checks on both the buyers and sellers of properties.

The industry is also subject to the Criminal Finances Act, which introduced the new criminal offence of failing to prevent tax evasion and additional tools to investigate suspected money laundering and terrorist financing.

Since the legislation was introduced, there has been a "ramping up of compliance activity," Mark Hayward, CEO of NAEA, told Business Insider. "Fines are not publicly being made known but, anecdotally, we know they are significant," he said.

Non-compliant firms have faced "business busting" six and seven-figure fines, said Hayward. The "huge cost" of failing to comply with new regulations and increase in enforcement action means the "fear factor" is growing.

HMRC is responsible for imposing fines for non-compliance with the regulations, likely as a result of a judgment handed down by a court for criminal offences. 

A spokesperson said, “HMRC takes failure to comply with the Money Laundering Regulations extremely seriously, and carry out regular checks to ensure customers correctly following the rules. Last year alone these checks led to us issuing more than 880 penalties to all sectors — including Estate Agency Businesses — for failing to comply with the rules.”

HMRC said it did not hold a breakdown of the 880 penalties by sector.

The sector is "predominantly unregulated"

Despite welcome regulatory changes, a key problem is that the sector remains "predominantly unregulated," said Hayward. "Anyone can set up as an estate agent tomorrow... there are no minimum standards."

This makes the sector vulnerable to criminal activity. "When they [criminals] look to launder money through properties, they look for the weakest link," he said. This is likely to be estate agents or property consultants with weaker due diligence procedures or a lack of basic knowledge on crime prevention, said Hayward — and these are "relatively easy to find."

It's not just high-end London properties that are used to launder money, said Hayward. Since foreign investment in university towns is not unusual, those seeking to launder money "would not look out of place" in places like York and Manchester, he said.

Criminals will also look to buy in areas where property prices are less sensitive to market fluctuations and where there will always be demand, in order to be abe to liquidate their assets at short notice if necessary.

New tools introduced under the Criminal Finances Act include Unexplained Wealth Orders, in which estate agents and other bodies can flag to law enforcement assets bought by individuals who don't appear to have had the legitimate means to afford them, or cannot explain where their money came from. Law enforcement may then seize the assets.

The onus is on estate agents to perform appropriate audits. Although not yet common, the possible use of cryptocurrencies to buy property is likely to increase with time, "and probably quite rapidly," said Hayward. Given concerns around the anonymity of some cryptocurrency users, this "might well be" a problem for estate agents going forward, he said

"We know that some firms are waiting to hear about the results of the visits [to check for compliance with the regulations] they have received from HMRC," Thomas Townson, partner and head of financial crime at leading business and financial advisor Grant Thornton, told Business Insider.

Going forward, there will likely be "further tightening of legislation" said Hayward. "It's not just the links [from money laundering] to criminal activity, but to terrorist activity which is increasing awareness," he said. 

http://uk.businessinsider.com/...

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