Letting agents should use innovative, digital solutions to ensure their businesses and clients are safe from property fraud and money laundering.
That’s according to CDDCheck, an innovative online platform that enables businesses to ‘electronically screen against individual stakeholders and businesses at a vastly reduced cost’.
The issue of full transparency and regulation against fraud and money laundering is a particularly hot topic at present, as letting agents who are not already registered have until June 10 2021 to register with HMRC to be fully AML compliant.
What does this mean for agents?
The terms of the EU’s Fifth Money Laundering Directive, implemented in January 2020, state that there is now a legal obligation for every letting agency business that lets property valued at 10,000 euros per month or its equivalent currency – £8,600 a month in the UK - to register with HMRC.
The pandemic saw the deadline for registration extended to June 10 2021, but after that date anyone who should be registered but isn’t will be committing a criminal act.
Despite the UK no longer being part of the EU, it seems highly likely that the UK will remain in line with any new AML legislation that the EU passes, because of the cross-country and international nature of fraud and money laundering.
The Fifth Directive was passed in 2018 and on January 10 2020 it was enshrined in UK law. While agents have been legally obliged to comply with the legislation for the last 18 months, Covid and Brexit complicated things and was the reason for the deadline being pushed back to June.
Agents can continue with their day-to-day business assuming they have started the AML registration process, with CDDCheck suggesting that HMRC typically confirm registration 45 days after a company has contacted them.
“To be compliant, there are a number of things that agents must adhere to,” Andrew Harris, the co-founder and managing partner of Bridgend-based CDDCheck, says. “This includes undertaking an AML risk assessment, providing thorough training for all staff working on the frontline, and having a detailed AML policy and procedure document in place.”
Harris says the seriousness of being non-compliant cannot be underestimated. Not only would an agency potentially be at the mercy of large fines, the most serious breaches could even lead to up to two years in prison.
“There’s also the reputational fallout to factor in,” Harris adds. “Agents will find themselves listed on the HMRC government for being in breach of AML and could start to read negative press about themselves in national, local and trade publications.”
How big a problem is property fraud and money laundering?
All the evidence points to property fraud – from mortgage fraud to fraudulent tenancy applications – being on the rise, Harris says.
Meanwhile, according to a government report in December 2020, luxury London homes are still being used to launder illicit funds. As a result, the National Crime Agency has stepped up its ‘McMafia-style dirty money’ investigations into questionable funds making their way into the country.
The risk level for the sector was upgraded by the national risk assessment of money laundering and terrorist financing 2020, with the damning words that ‘corrupt foreign elites continue to be attracted to the UK property market, especially in London, to disguise their corruption proceeds’.
The joint report by the Treasury and the Home Office also revealed that estate agents had their risk upgraded from low to medium, with signs that some in the market for high-end homes were failing to comply with the rules.
It found that half of the estate agents advertising properties for sale at £5 million had failed to register with HMRC for AML supervision in 2019 or had failed to pay their annual fees for this. HMRC found that, even among companies that had registered, not all had implemented sufficient training for staff.
How can online solutions help?
Even now, many firms use old-fashioned procedures for screening their clients and customers – even though such processes are often time-consuming and prone to human error.
“What is needed instead is a simplified and automated process that helps individuals and organisations to be fully compliant in a quick, transparent, secure, tech-friendly way,” Harris continues. “Such processes help to reduce the chances of property fraud or money laundering taking place in the industry.”
“The pandemic has shown how well digital solutions can work, and how people are increasingly comfortable with the online world, so now is the time for letting agents to get their client-screening and AML processes in place.”
He adds: “For those agents who aren’t already registered with HMRC, it’s vitally important that this happens in the next few weeks before the deadline, otherwise severe repercussions could follow. They should rest assured, though, that there are fast, digital, transparent solutions to making sure businesses are fully regulated and fully AML compliant.”
CDDCheck, the sister company of Handelzeker BV, headquartered in The Hague, was founded last year. The companies have helped over 1,000 estate and letting agents across Europe, with more than one million AML checks carried out since 2017.
“Our main USP is the ability to electronically screen against individual stakeholders and businesses at much lower costs,” Harris concludes. “We offer a fully integrated KYC solution that provides complete sanction and PEP screening along with adverse media and a state-of-the-art monitoring service.”
