Identity of estate agents fined under anti-money laundering regulations could soon be revealed, HMRC warns

The identity of estate agents slapped with penalties for failing to adhere to anti-money laundering regulations — currently kept secret — could soon be revealed.

That was the warning from HMRC, which said it was reconsidering its policy on the issue.

At present, HMRC doesn’t reveal which estate agents have been fined, nor the size of the penalty they have been made to pay.

However, that could all change “shortly” as the taxman gears up to publicise details of certain offenders.

An HMRC spokesperson told EYE: “Under the new Money Laundering Regulations, HMRC is developing a policy to publish details of those not complying with the MLRs.

“On a case-by-case basis, HMRC will consider whether publishing would be disproportionate or if the penalty is of a minor nature and this will inform whether we publish penalty information with full identity details, anonymously or not at all. This policy is due to be implemented shortly.”

The revelation came to light following a report by Business Insider on Monday, which claimed that estate agents were being hit with secret six- or seven-figure penalties for failing to complete anti-money laundering checks properly.

Figures obtained by EYE from HMRC have cast doubt on whether the fines are actually anything like this big.

Quoting Mark Hayward, chief executive of NAEA Propertymark, Business Insider said there had been a “ramping up of compliance activity” but that the level of fines was not being publicly revealed.

It also quoted Hayward as saying that the “business busting” penalties ran into six or seven figures and that the “huge cost” of failing to comply with the new regulations and increase in enforcement action meant the “fear factor” was growing.

However, when EYE contacted HMRC to confirm the story, it revealed that the 886 penalties it issued to companies across all sectors of the economy last year together totalled just over £1.1m.

HMRC would not break down the penalties it issued further, nor say how many related to estate agency businesses, but it works out at an average of just over £1,290 per penalty.

The biggest fine an estate agency is known to have received for failing to comply with money-laundering legislation was the eye-watering £169,000 sanction issued by the now-defunct Office of Fair Trading to Jackson Grundy in 2014.

At the time, it was a fine 17 times larger than any previous penalty imposed on an estate agent but Jackson Grundy won its appeal against it in 2016 and had it reduced to just £5,000.

Mike Day, who runs Integra Property Services and is a regular EYE columnist, confirmed that HMRC is conducting regular visits and spot checks.

He said: “Mostly they are arranging to go and see an agent and then they are effectively conducting a bit of an audit. I have not heard of any huge fines.

“The biggest case I heard about was Jackson Grundy, which was £170,000, but that was reduced on appeal.

“There have been fines of £30,000-£50,000 which I know about.

“There was an interesting report recently from the National Crime Agency, which is who you should be making Suspicious Activity Report to if you suspect there is something dodgy happening.

“They produced a report that said that over the last 18 months only 0.2% of Suspicious Activity Reports had come from estate agents. The inference of that was quite clearly that estate agents aren’t treating this as robustly as they should do.

“I have had a number of clients contacted by HMRC. It is London-centric but it certainly isn’t exclusive to London. I have a client in Shrewsbury who had a visit from HMRC in Manchester.”

When contacted by EYE, Mark Hayward said: “All estate agents must be registered with HMRC for anti-money laundering purposes and are required to adhere to its systems and procedures.

“HMRC are making spot and random checks among agents, and failure to comply with anti-money laundering regulations will result in substantial fines. Due to the remit within which HMRC operates, it is currently unable to make public the names of those who have been fined, and the value of such fines.

“The case of £170,000 is historic and nearly four years old, before HMRC took control of the sector. As all other comments are anecdotal we cannot comment further, as they’re not in the public domain.”

HMRC did not provide a timescale to indicate when it may start naming and shaming firms that have been fined under anti-money laundering regulations.

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8 Comments

  1. TwitterSalisPropNews53

    Conveyancers can help the estate agent with this – as when they conveyancers are instructed in the conveyancing they obtain ID, and can certify it for the estate agent…….I know Trethowans do this for estate agents……but the conveyancer needs to be instructed at the same time as the estate agent – which should be happening now, as it is ‘back foot’ timing when an offer is accepted and then the conveyancer is instructed. That loses 2-3 weeks.

    And few conveyancers (in fact get their guarantee they won’t charge) would charge their client if after opening a file, the client then pulls out….so instruct a conveyancer early.

     

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  2. ArthurHouse02

    From an office point of view the whole thing is quite simple, just get the vendors or buyers ID sorted straight away. It’s not difficult and it’s not complicated. Shouldnt take any more than 5 minutes of your day. Its the reporting thing where the problems start, we arent forensic crime officers, we cant spot fake ID etc and working in the sticks we arent likely to come across 100s of people buying property to launder the proceeds of crime.

    I can really imagine the agent who has a house on their books for 6-8 months finally getting a buyer but because they seem dubious, reporting them to the rozzers.

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    1. MichaelDay

      Reporting to the NCA is straightforward and, providing you ask for a consent/defence – you will get a response confirming you can continue or whatever.
      Agenst risk exposing themselves to fines and criminal proceedings if they fail to report – imagine if the lawyer and the lender in a particular transaction has reported and the agent hasn’t! 5am knock knock?

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  3. MichaelDay

    Accepting “certified” ID is OK providing you have risk assessed the organisation/person doing the certification. The “risk” however still lies with the agent instructed.

    Money laundering compliance isn’t just about having copies of ID – it is about the nature of the transaction – particularly around funding – where is the source of funds coming from, reason for sale etc. Agents should be completing a simple risk assessment as part of their customer due diligence on every seller client and every buyer customer.

    It is also a requirement to search the PEPs and sanctions register and possibly apply extended due diligence vs customer due diligence.

    I strongly recommend trying to get original documents and undertaking an online check which, together, should cover all bases in regards ID. The funding and nature of transaction aspects should be the subject of risk assessment.

    Remember there cannot be money laundering with out the money – so proof of funds is not the same as source of funds.

    Also, to my knowledge there has never been a mortgage fraud or similar crime without a “bent” lawyer and others involved.

    Most Money Laundering crimes are tax evasion and so the ID of the person isn’t in doubt it is what they may be doing that is.

     

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    1. ArthurHouse02

      And after doing all this i might even get around to sell some houses

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  4. seenitall

    why not report all of them? get consent – your going to be covered. Push the work back to HMRC

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  5. CountryLass

    My biggest problem is that a lot of the tenants and landlords I deal with, particularly unmanaged ones, don’t see why they have to provide new copies of documents, and in some cases have no photo ID that we can accept, but have lived there for decades!

    All new clients are getting ID taken, but the older ones are ignoring my requests for the information….

    And how am I supposed to know who owns more than 25% of a business? Joe Bloggs could say he owns 100% of Bloggs Inc, and how am I to know if its actually him, his wife and 2 kids who have a stake?

    Or spot a fake ID?

     

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  6. GeorgeHammond78

    All I can say is ‘GOOD’. Name and shame the miscreants. As has already been stated more eloquently than I can, AML is not difficult to comply with, just as RtR isn’t either.

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