It has been a requirement, for many years now, for estate agents to register for Anti-Money Laundering (AML) supervision with HM Revenue & Customs, as well as to perform checks on their customers. This involves carrying out Customer Due Diligence (CDD) checks, as a matter of best practice. These checks enable estate agencies to ensure that their customers are not renting or letting a property for illegal purposes, among other such issues.
However, this was never a requirement for letting agents until recently. As of 10th January 2020, the new regulations directly affect any letting agent in the UK. This includes those in places like Fulham and the surrounding areas.
As we will see in this blog, the Fifth EU Money Laundering Directive brings significant implications and challenges to businesses involved in letting, irrespective of the Brexit outcome.
The Directive states that any letting agent managing either residential or commercial properties that yield an income of 10,000 Euros (or equivalent) per month, or more, must comply with the new regulations.
All letting agents throughout the country, including those in the Fulham area, have to register with HMRC before May 2021, if they meet the above-mentioned requirements.
These new Money Laundering Regulations dictate the following:
• Even though the online registration system does not go live until May 2020, every letting agent must comply with the regulations from January 10th onwards
• Agents have to carry out CDD checks on any new landlords or tenants in Fulham and the rest of the country, effective immediately. In addition, the renewal of an existing tenancy after 10th January requires a letting agent to perform the appropriate checks on both parties. This involves identifying and verifying customers, in addition to gathering the relevant information about the intended nature of the business relationship. Furthermore, these enhanced measures must include obtaining information on the source of wealth and funds of both the customer and of any beneficial owners
• Taking appropriate steps, letting agents must assess and identify any risks of terrorist financing and money laundering. This includes producing a current, written risk assessment as well as comprehensive written policies and procedures in place, to determine how they plan to manage these risks
• Whether in Fulham or elsewhere in the UK, each business must appoint a nominated Money Laundering Reporting Officer (MLRO). This individual is responsible for ensuring that the letting agency complies with the new regulations
• If an agent or business has already registered with HMRC for sales, they must also inform HMRC of their letting activity
• Business owners in Fulham and across the country must provide regular training to ensure that their letting agents understand the law. This training should also help employees to recognise and deal with any transactions that might relate to money laundering and other such activity
Failing to comply with these regulations may result in civil penalties or even criminal prosecution. This may entail unlimited fines and/or a prison sentence of around 2 years.
Some letting agents do not fall under the scope of regulated businesses, suitable for AML supervision with HMRC. However, at Trust Milo Ltd, we believe that it is best practice for every letting agent to perform CDD checks on all their customers.