Letting agents being brought into anti-money laundering regime via back door

Letting agents are being brought into the anti-money laundering by stealth.

But how?

Estate agency businesses are regulated by the Money Laundering Regulations of 2017 and as such there are numerous statutory obligations estate agents must comply with.

These range from registering with HMRC through to conducting customer due diligence steps on sellers and buyers.

Letting agencies are not regulated and so none of the obligations apply and this has always been the case.

However, there is definitely an interpretation change that is gathering momentum which means letting agents are being forced to meet the same obligations as estate agents, even though they do not have a statutory duty to do so.

The change is being initiated and forced on to letting agents by the banks.

I was contacted last year by a letting agent, just after the Regulations changed.

He was opening business accounts with a German bank.

It advised the agent that it would not open the agent’s client account, unless he implemented money laundering processes to identify and verify landlords’ and tenants’ identities.

The logic behind this being that banks are regulated in the same way estate agents are and they are required to conduct their customer due diligence (CDD) steps on all account holders, but importantly they also had to conduct CDD on any beneficial owner of the assets in an account.

Client accounts hold money that does not belong to the letting agent. It belongs to landlords and tenants, and as such the German bank needed to conduct CDD on landlords and tenants with money in the account.

The bank quite clearly could not do this as it had no commercial link to the landlords or tenants and even if it wanted to do it, the work involved would have been enormous, with no guarantees and little chance of successfully obtaining the information.

The German bank therefore decided to throw the obligation over to the letting agent and expected them to conduct the required CDD.

At that point I thought little of it and assumed it was a one-off interpretation from a German bank that would not impact on agents more widely.

I was wrong.

Calls from agents started to come in. Slowly at first, but ultimately it was clear the big high street banks were all getting onboard with it.

So much so that they are now requiring letting agents to complete questionnaires which are clearly aimed at forcing them to have the correct AML policies and procedures in place and forcing them to conduct CDD before opening any client account.

My understanding is that the banks have expanded applicability to cover any business having a client account, such as property management companies and landlords with large portfolios.

  • David Beaumont runs Compliance-Matters, an agency compliance specialist. He also provides free advice to EYE subscribers on any compliance matter. You can contact him on 0161 727 0798
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One Comment

  1. UKtenantdata

    It was actually Handelsbanken. who are a Swedish bank.

    Other banks that are moving in the same direction are HSBC and RBS, so yes there does is definitely a pattern forming.

    UKtenantdata include as standard and at no additional cost full AML/KYC validation within our referencing service , so if you have concerns please give us a call and we can walk you through the product and give you some clarity on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

     

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