Shock as letting agents could be told by banks to do anti-money laundering checks on all clients – despite directive

A letting agent has been told by his bank that it requires Politically Exposed Persons checks to be done on all letting clients.

This is despite the fact that letting agents do not have anti-money laundering duties under the latest directive which came into effect in late June.

Handelsbanken has confirmed to EYE that it does indeed require the clients of letting agents who have client accounts with it to be screened for anti-money laundering purposes because the bank itself has to comply with the AML Regulations.

This is not something that has been flagged up to agents previously but has wide-ranging implications for the industry.

The requirement – likely to be imposed by other banks – emerged after a branch of Handelsbanken told Mike Cole, group managing director of Imagine, which has branches in Hertfordshire, that his business must carry out AML checks.

It told him the requirement is essential for the bank to adhere to the Financial Conduct Authority’s rules on client accounts.

Cole was told that if he does not comply, the client account facility will be withdrawn.

Cole told EYE: “The recent update in Money Laundering Regulations states clearly the rules don’t apply to letting agents. But of course any letting agent has a client account.

“The bank themselves could see these two pieces of advice were totally at odds with each other, but insisted their problem was to do what they were told was necessary and as such are insisting we need to match their own money laundering policy on our client account.

“This would mean hundreds of new checks at additional financial and time cost to our business.”

He said that neither he nor the bank was clear whether the checks should be on landlords, or on both landlords and tenants.

He said: “If it is tenants, do we have to check on every sharer?

“I’ve not heard any other agents highlight this issue, but my bank insists it’s all banks and that this will be applied across the board in due course.”

He said he was told that HSBC is already adopting the same approach as Handelsbanken.

Cole said he was given the strong impression that all banks are becoming “paranoid” about client accounts across the board because of the risk of them being blamed for allowing a Politically Exposed Person to do money laundering.

Cole added: “They said they have to check 1% of our cases each quarter. But of course the only way for us to guarantee we pass those checks was for us to have checked everybody – so the workload on them is minimal but on the agent massive.”

Yesterday evening Handlesbanken confirmed to EYE that it does require checks.

A spokesperson said: “Whilst letting agents are not necessarily subject to the Money Laundering Regulations 2017, Handelsbanken has a duty to ensure it complies with the Regulations.

“This means that the underlying customers and the beneficial owners of any client account provided by the bank have to be screened, and the bank has to be satisfied that the appropriate due diligence has been performed and passed.”

EYE has also asked HSBC about their AML requirements for letting agents with client accounts. We have also asked the FCA for clarification.

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7 Comments

  1. waco79

    Surely any half decent serious letting agent checks ID and proof of address on all tenants as part of referencing?

    As for vetting the landlord- surely they do land registry searches? Checking ID and getting proof of address is cheaper and less hassle than that.

    Landlords fill in terms of business, so asking for proof of address and their ID (if you don’t already) is hardly creating a “massive workload”.

    Sounds like a very lazy agent , (if  they think that is a massive workload), that currently works to poor standards.

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    1. Elbo59

      checking ID to be AML compliant means having sight of original documents or certified documents, and the ID has to be in date, and that means with lettings clients, we have to update it regularly.  This is not only hugely time consuming but it’s difficult when clients don’t want to bring in their original documents, or live abroad and claim they can’t get them certified.  With the speed of the lettings industry this has a big impact on our ability to do our job.  If it was as simple as doing a Land Registry check and then getting a scanned copy of ID there wouldn’t be any issue at all.  It is important to do AML checks in sales, but with lettings any money laundering has already been done on the landlord side of things so it is arguably un-necessary.

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    2. coleface

      Lazy?! Was that really necessary?! The lazy element is that you haven’t read up to understand the issue.

      This is not ID checks alone, which of course we already do. These are additional Politically Exposed Person checks, including adverse media and sanction checks. No agents do this at the moment, not least because as they are part of Money Laundering regulations that we are advised don’t apply to lettings.

      They can be outsourced at a cost or undertaken by your own staff. If you let 100 properties a year in a branch and have to check tenant and landlord (including sharers you are looking at at least 300 checks per office. Times that across our industry and its a massive undertaking. At a time we are having to line up for not charging fees.

      Seems wrong to me on that level, but even more wrong that our banks can dictate additional undertakings to secure Client Account facilities on a subject we are told doesn’t apply to us.

      Mike Cole

       

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  2. Rickman2154

    When will all this nonsense stop? As if we don’t do enough due diligence already, with ‘Right to rent’ etc and on top of which they have banned agents charging tenant fees!! We have to pay for the tenants deposit to be protected, pay for business car insurance to chauffeur tenants to various properties, advise tenants on their legal obligations by legally trained staff and so on. This blatant attack on our industry is completely unnecessary. where is the ARLA & NAEA voice when we need them??

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  3. marcH

    Typical namby-pamby pass-the-buck attitude of banks these days. Before entering the hallowed world of estate agency, I worked for HSBC for over two decades when it was a grown-up bank and before it resorted to a box-ticking mentality like all the others when it came to client relationships. When looking recently to switch to Handelsbanken, I was actually lied to by this bank (who manage to function in part only because of an agreement with HSBC) who claimed they could not entertain estate agency business as it was ‘too risky’. This is a complete negation of everything banking is supposed to stand for: assessing risk, pricing it, then lending funds against adequate security. Why on earth should letting agents now also be expected to do the job of banks as well as the govt as expressed above? Maybe we should move our accounts to some of the start-up banks (Metrobank is one) who seem prepared to go back to classic banking.

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  4. Trevor Mealham

    Who is going to check the banks.

    My experience of one is that they are some of the biggest liars and crooks going.

    Just look in the news recently re bank staff frauds

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  5. UKtenantdata

    This might help!
    Now that banks are starting to insist on AML validation for client accounts this has added a further layer of compliance to the letting process, we have simply removed the problem by making it a standard part of our process and have provided the agency with a “Ready for Audit” function to make their life a lot simpler when audit day arrives. AML Validate will also be available when the day comes, to validate landlords AML statuses which can be conducted using our mobile IOS app and incorporates OCR technology to scan all the relevant ID documents. This will provide a complete AML report including PEPS & Sanctions with an in depth identity and fraud score.

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