Money laundering – how will HMRC view these buyer scenarios?

Agents need to conduct a money laundering risk assessment and conduct customer due diligence on buyers – that is a statutory duty that comes from the Regulations not HMRC.

The guidance HMRC has issued on the subject currently states that the buyer’s identity must be verified before the contracts are exchanged and so in theory agents have weeks, if not months, to obtain the appropriate ID.

In practice, if it is not carried out early in the buying process the chances of being able to do it diminish as time goes by.

My advice therefore is the same as HMRC – do it as soon as possible once an offer is made.

However, there are a few scenarios that do not fit with the HMRC perception of estate agency and they are ones they have not considered, as yet, and they possibly never will as the answers are unlikely to fit with the requirements of the Regulations or the guidance!

  1. An online agent is instructed to market a property and the seller pays for the basic service up-front. All potential viewings are generated through the website and are handled by the seller not the agent. Viewings, negotiations and agreeing a sale are handled by the seller and the agent is simply advised when a sale has been concluded to cease marketing.
  2. An agent is instructed to market a property by a property developer who has a show home on site and the developer handles all the negotiations and agrees all the sales and the agent gets paid for simply marketing the property.
  3. An agent sub-instructs a number of other agents who introduce potential buyers to the property. All the negotiations and sale agreement are handled by the initial agent and the sub-agent is paid a finders fee, if their buyer purchases the property.

There will be other scenarios similar to these where the agent and the buyer have little or no contact and so the opportunity for the agent to meet their statutory obligation is not going to be possible.

If you have any other situations that HMRC should be aware of let me know by emailing the details to david@compliance-matters.co.uk

We can only assume, or hope, that they will take a practical stance when enforcing the Regulations and compliance with the guidance.

  • This article is by David Beaumont who runs Compliance-Matters, an agency compliance specialist. He provides free advice to Property Industry Eye subscribers on any compliance matter. You can contact him on 0161 727 0798. Compliance-Matters in conjunction with Landmark are running FREE update sessions around the country on the new Money Laundering Regulations. To find your nearest venue click HERE.
x

Email the story to a friend

7 Comments

  1. sb007ck

    1. The call centre agents, who all claim to do the same as high street agents, have to figure it out. The “:Local” “expert” has to find the time to meet the purchaser face to face…or get the ID verified as is acceptable,

    2. If the agent has introduced the purchaser, then as above they need to find the time to meet the purchaser.

    3. In this day and age, who the hell still does this????

    Report
    1. JamieHope41

      3. This is the basis of most of Prime Central London agency. Due to the capital values involved, we are able to operate a brokerage system between prime agents. With sub agency happening so often HMRC is requiring that we KYC the clients of other firms which is a real headache and raises issues of data protection etc.

      Report
  2. 40yearvetran08

    What about auctions? I walk into an auction, put my hand up and the lot gets knocked down to me. Have I not exchanged contracts? I then think oh F*** what have I done, sorry Mr auctioneer I cannot find my ID. If all buyers have to be pre registered that must diminish the effectiveness of the auction, at least that’s what I shall be telling my clients who say they want to instruct an auctioneer!!

    Report
  3. NickTurner

    I presume Auctioneers will have to pre vet all those who want to bid at a property auction so that only those who are vetted can bid.It will be a condition of the auction that only those people registered, pre vetted etc can bid. Quite a cost to who???

    Although the guidance from HMRC says a purchaser must be vetted before exchange it defeats the auction scenario if the highest bid is made ‘subject to money laundering regulation’

    As to listing agents as opposed to traditional high street agents and private sales and…..

     

    From a practical and pragmatic point of view how many potential purchasers have failed the new MLR’s? Would the normal enquiries by a good agent before accepting the offer have flushed out any rogues purchasers wishing to launder  a couple of bob?

    Report
  4. s71

    Has any of the clowns in HMRC asked all the new built developers who go to the Middle East, Far East or  Africa to sale properties if they have done any money laundering checks???

     

    Report
  5. aSalesAgent

    4. An agent negotiates a sale to an elderly buyer (for example) and conducts due diligence before sending the Memorandum of Sale. At exchange of contracts, the elderly buyer decides it would be best in the long-run if the property was bought on their behalf by another family member. The agent is not informed of this by the solicitors and at no point do they ever meet with, or have any correspondence with, the eventual buyer.

    Report
  6. gk1uk2001

    Shouldn’t it really just be down to a solicitor to check all of this out, what with all of their legal qualifications etc……? What is the point in the agent doing it, then the solicitor having to do it as well? Pointless.

    Report
X

You must be logged in to report this comment!

Leave a Reply