‘Lazy’ agents warned that they cannot outsource money laundering and due diligence obligations

A lawyer has warned that estate agents trying to offload their anti-money laundering responsibilities via outsourcing to a third party will not succeed.

Arthur Robinson, director at north-east law firm Emmersons, said: “Recently my firm received a request from an estate agent in relation to confirmation on how we carried out customer due diligence and AML checks, and asking to rely upon our processes.

“I declined the offer to act as their risk managers.

“Why anyone would wish to do this is beyond me, other than being lazy or misbelieving that reliance upon a third party such as a solicitor offers some form of protection.”

Robinson said the legal guidance is very clear.

Anyone relying on a third party still remains legally responsible for any failure – meaning that reliance itself is a risk.

Furthermore, if an agent relies on a third party to undertake the checks, the guidance says “you will still need to do your own risk assessment of the seller and buyer and the transaction and you must still carry on monitoring the business relationship”.

The guidance also stresses that reliance on a third party “does not include accepting from others to verify a person’s identity for your own customer due diligience obligations”.

Robinson said that his own firm has careful procedures in place, including initially checking photo identity; obtaining utility bills and six months of bank statements; checking the latter to see if it looks like a legitimate account – ie, to see if there is a history of money coming in and out.

Checks continue to be made as the transaction progresses and if there are any gaps in information or other concerns, the case is reviewed by a director and there can be no work undertaken on the file until the director decides there can be.

This can lead to requests for further information from the client or those making gifts a contribution to the purchase price, or a decision that the firm can no longer act.

Robinson said: “I wonder if estate agents are undertaking a risk assessment on the buyer and seller, and on the transaction itself, in relation to each transaction?

“I wonder how many are doing it thoroughly.

“Not long ago, we received an email from an estate agent to confirm that the person who had visited their offices was our client.

“How could we?

“Client due diligence and AML is not about a tick-box approach.

“It is not about obtaining photo ID and putting it on a file. It is not about ignoring inconsistencies.

“There is a process, which includes analysis and record keeping, which MUST be undertaken. It is either that or an appearance in court.”

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/628696/Estate_Agency_Businesses_Guidance_.pdf

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17 Comments

  1. Essjaydee51

    Unless this firm actually do do as is said above then I think he is over egging what they actually do do,

    i have just had an experience of another senior partner of a different firm who I had to threaten with the SRA unless we saw some actual service for our mutual client, turned out he does approx 1.5 hours work per day maybe he was doing all the “progressive” checks too and didn’t have time for the other important work ie actually working for the client, there are lazy agents out there that will have to smarten their act much like there are lazy, arrogant solicitors too.

    Anyone else out there who wants to have a dig at estate agents!!

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  2. Peter Ambrose (The Partnership)

    Always good to see a bit of name-calling first thing in the morning!

    However.  Moving past these historic prejudices, there is a serious point here about ongoing checks.

    Some agents we talk to are being offered outsourced ID checking and have approached us to see if we will do it for them.

    Whilst we’d love to help our partners out, it IS an ongoing process throughout the transaction, and we are not 100% certain that agents will be covered by having someone else do the checks at the beginning.

    We had a case where we had to stop acting SIX WEEKS into the deal, because we found the seller was granting the buyer a mortgage and it transpired they were directors of the same company!  Obviously they didn’t declare THAT at the beginning!

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    1. Bless You

      any links anywhere ? I can’t find any guidance for estate agents

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      1. PeeBee

        In addition to the link at the foot of the above article, Bless You?

        There are some contained in that publication.

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  3. aSalesAgent

    “Checks continue to be made as the transaction progresses and if there are any gaps in information or other concerns, the case is reviewed by a director and there can be no work undertaken on the file until the director decides there can be.”

    “Gaps in information?” How many more ways can solicitors/conveyancers think of to slow the process down?

    Sod this!

    Emmersons Solicitors, you say? *scribbles down name*

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    1. Dom_P

      Not sure I agree with you on this; surely if there are gaps in information which cause concerns around AML it would be prudent to examine the customers details to make sure your business is not putting itself in a position of liability; they are only suggesting this is reviewed by a director which sounds like good business practice to me.

      As a point of note, they are discussing their own due diligence process with their direct clients; this is not ‘solicitors/conveyancers’ slowing the process down as he has made it perfectly clear that agents should be conducting their own AML checks and not relying on solicitors checks to satisfy their AML obligations.

      At the end of the day, you need to apply a risk based approach; if you feel there is little/no risk then ensure your decision making is documented in case of any future investigation and crack on, but be aware that a certain level of diligence is mandatory.

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      1. aSalesAgent

        I can understand a solicitor holding back exchange of contracts until they are satisfied, but to put a file on hold altogether?

        How long does it take one of Emmersons’ directors to investigate each and every gap in information? Three hours? Three days maybe? And who is reporting these gaps? The paralegals and trainee solicitors?

        Probably the wrong day for me to comment on this. I am pulling my hair out with a firm’s lackadaisical ‘Exchange & Completion Team’.

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        1. Dom_P

          That’s a fair point, although to be fair to Emmerson’s it might be a quick process, it might not. I guess it depends on the nature of the ‘gap’ in question.

          Good luck with the ‘Exchange & Completion Team’!

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  4. Emmersons46

    Maybe the estate agents ought to read the Regulations. The process we undertake is to make sure we comply with the law. The same law that applies to estate agents.

    You can criticise what we do but Im trying to ensure neither I nor any colleagues end up in Court.

    Our systems are based upon what the SRA and National Crime Agency expects ie compliance with the law.

    Yes the obligation to review the transaction is ongoing and can only be dealt with at Senior Management level.

    Those who scoff and scorn need to fill the gaps in their knowledge through training.

    By the way, we also represent people interviewed by the Police or NCA so yes scribbling down our name might come in handy.

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  5. IWONDER36

    Are there any other jobs that can be incorporated into an estate agents roll?

     

    Border force, police, social worker, financial regulator, HMRC officer?

    We are expected to do it and for less and less!

    But let’s leave the cash cleaning sunbed shops, taxi ranks, takeaways, car washes out of it because many of those are not owned by the friends and family of known criminals are they?

    Keep bashing the hard working entrepreneurs while allowing the real criminals to increase their wealth right under our noses.

    We are not even a cash business and there are many processes which would highlight dodgy dealings if we were.

    Start fighting real crime and money laundering instead of turning a blind eye, imbecilic politicians!

     

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    1. Dom_P

      You realise property is one of the biggest and most effective ways of laundering funds and disposing of proceeds of crime?

      Fish and chips, washing your Mondeo and getting a tan not so much, hence the increased vigilance in this sector, as inconvenient as it may be.

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      1. IWONDER36

        Yes thanks, I am aware of that but my point is that the financial services aspect is where the checks need to be concentrated and the correct training provided so that there is a universal method for dealing with it.

        Criminals also know that little and often soon builds into a healthy bank balance but carries less risk.

        Many business run with little genuine custom as the books are falsified to clean ill-gotten gain and the attitude and general misconception that it doesn’t matter because it’s only fish and chips is exactly the reason that criminal gangs have wealth to further invest in property, or waste on Range Rovers.

        I am not opposed in principle to the extra checks but my point is that criminals seem to go largely unchecked in those cash businesses and any agent that is in cahoots with laundering will surely warn them to diversify into less obvious avenues, rather than expose them.

        Agents shouldn’t be the scapegoats for everything, we pay taxes to government, who are meant to employ people to weed out criminal behavior. Not to mention the threat to life of an innocent agent getting caught up in the exposure of such people.

        It’s a farce!

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        1. Dom_P

          And my apologies; you raise some very good points and I hadn’t meant to come across as abruptly as I did having re-read my comment.

          I suppose it’s a balancing act; the difficulty being that as you quite correctly point out, an agent (or solicitor for that matter) in cahoots with a criminal is not likely to follow process correctly, but to my mind that strengthens the need for good, proper agents to follow the process correctly; whilst possibly time consuming and resource hungry, it enables a business absolute faith that they are acting with integrity and honesty.

          And I suppose, those fish and chip shops, tanning salons etc. operating without suspicion must have been purchased through an agent at some point, and one would hope the requisite checks would have prevented this from taking place?

           

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          1. IWONDER36

            Thank You Dom, I hadn’t taken your comment as abrupt or personal, but I appreciate your apology and subsequent comment.

            In my town alone I could point out 20+ such businesses which on the surface may have been purchased or leased legitimately, as the person running them will be a so called legitimate business, and will usually have a clean record.

            It is difficult to prove in cash type businesses how many customers actually paid for services and so a substantial amount of cash can be put through that business to clean the money, which can eventually lead to the purchase of property.

            Again, these are well organised groups of people and they will no doubt have a network of people that they know they can use.

            We will continue to do our part but the government should know that the buck doesn’t stop with us.

            Unless an agent has knowingly facilitated money laundering, then the ‘The punishment should fit the crime’ label isn’t workable as there was no crime, simply a mistake or an oversight or they themselves may have been conned and therefore become the victim, not the co-conspirator.

             

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            1. Dom_P

              Completely agree with you, particularly your last paragraph.

              I suppose my mindset on this says that doing the correct checks is almost an insurance here, proving and documenting beyond any doubt that an agent is not knowingly facilitating any money laundering and hasn’t comitted an offence.

              I completely agree that these issues are not solely down to an agent to prevent, and the government/NCA shoudl be doing their part too, I just think it can’t hurt for a united approach to preventing crime whilst considering the need to run an efficient business without too many barriers to operation.

              One would hope that the smaller business operating under dubious practice would at some point come under scrutiny from HMRC or similar and be dealt with accordingly?

               

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              1. IWONDER36

                We agree, nice debating with you. Have a great day!

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                1. Dom_P

                  Likewise, have a good evening!

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