Estate Agents & Money Laundering Regulations

Since 2007 Estate Agents have been required to undertake checks on their customers prior to acting for them. Her Majesties Revenue & Customs (HMRC) have become very hot on this in no small part due to the fact that of all the ‘suspicious activity’ reported to the National Crime Agency (NCA) concerning money laundering only 179 submissions or 0.05% of the total last year were made by estate agents. This is against an estimated annual £35 billion worth of property transaction in 2014!

Kaye & Carey fear that many vendors are not aware that it is unlawful for an estate agent to offer a property for sale, even ‘off market’, until they have fulfilled their obligations in respect of ‘The Act’. We therefore think that this is an opportune moment to make Vendors aware of what is required so that this information is available at commencement of the agency.

The KYC (Know Your Client) checks below are required to satisfy the legislation and presume that the estate agent has met the vendor thereby confirm their identity and address. They are:

• Full Name
• Residential Address
• Date of Birth
• Verification documents- Valid Passport/Valid Photo card Driving Licence/National Identity
• Card/Firearms Certificate/Identity Card issued by the Electoral Officer for Northern Ireland

Plus

Utility Bill/Bank/Building Society or Credit Union Statement/Recent Mortgage Statement from a recognised lender/ Council Tax Bill.

If the property is held in more than one name then the verification checks must be carried out for each individual.

It is not uncommon for the seller of a property not to be present in the UK, they may be living overseas for example, if that is the case then the above must be countersigned as authentic by a professional person known to that person within the vendors’ jurisdiction.

Companies and Trusts

For the above we will require:

• Company Registration Number
• Registered Address
• Company’s Certificate of Incorporation
• Country of Incorporation
• Confirmation that the instructing person has the authority to act on behalf of the company.
• For private or unlisted companies an estate agent must obtain the names of all directors and the names of individuals who own or control over 25% of its shares or voting rights.

Whilst not a requirement of ‘The Act’ it is sensible for a Land Registry search to be undertaken to confirm ownership and kept on file.

For clarification the customer is the person(s), trust or corporate body from whom the Estate Agent will receive a fee. In the majority of cases this will be the seller of the property.

However should an estate agent be instructed to acquire a property by one of the above entities and receive a commission then they become the customer and the checks should be carried out on them.

In the event that an estate agent is concerned about the authenticity of the information provided or that they have suspicions about the purchase. For example they might be buying a property in the agents view beyond their means then the estate agent is obliged to submit a Suspicious Activity Reporting (SAR) to the NCA.

Some warning signs of suspicious activity an estate agent might consider are:

• Transactions are not at arm’s length
• No apparent reason for using the firm
• A transaction is carried out for less than the market rate
• Settlements in cash
• We are asked to hold cash in our client account
• Reluctance to provide information for identity checks
• Intermediaries used to hide identification of purchaser
• Funds going overseas to a third party
• Significant and unexpected improvement in their financial position
• Customer reluctant to show source of funds

If an agent is concerned by one or more of the above then they are to report it to that companies designated Money Laundering Office, or in their absence the Deputy Money Laundering Office. A report will then be filed on the National Crime Agency website: nationalcrimeagency.gov.uk

If you wish to discuss the implication of The Money Laundering Regulations 2007 with a member of the sales staff at Kaye & Carey please do not hesitate to contact either Adam Carey or Matthew Kaye. If you would like further information on The Money Laundering Regulations 2007 guidelines then please click on the following link: gov.uk/government/publications/money-laundering-regulations-2007-supervision-of-estate-agency-businesses