Money laundering obligations – Who do they apply to...

There is widespread misunderstanding within agency concerning money laundering obligations.

The first thing to note is that contrary to popular belief the Money Laundering Regulations 2007 have little to do with the process of money laundering!

The Regulations in general terms specify which business sectors are ‘Regulated’ for money laundering purposes and then they specify what actions regulated businesses should take.

These actions focus around customer due diligence (CDD) or as it is sometimes known ‘Know Your Client’ (KYC). There is little reference to the laundering of money in the regulations.

Estate agency is a regulated business sector and therefore the CDD obligations within the regulations apply to estate agents, or more appropriately, I should say, they apply to anyone when they act as an estate agent.

This needs to be emphasised, because the obligations only apply when there is a business relationship between an agent and a seller or in the case of acquisition agents, a relationship with a buyer.

The CDD obligations do not apply to an agent who conducts a survey, for example, or if the agent does any other type of work for a client that does not involve marketing a property and introducing buyers or sellers to them.

Most importantly the regulations do not apply to letting agents and they do not apply to the lettings activity of an estate agent.

As a compliance consultant I work with agents on a daily basis and many misunderstand their obligations.

How many letting agents have clauses in their terms outlining that they have obligations under Money Laundering Regulations to obtain clients ID?

How many have terms in their tenant applicant forms saying something similar? All wrong. As a letting agent you have no statutory obligation to obtain anyone’s ID.

This does not mean to say letting agents should not be obtaining client and applicant ID. It is best practice and good business sense to obtain ID from landlords in order to protect your business and obtaining it from applicants to protect your landlords' interests.

Not to mention your Right to Rent obligations.

However, what you should not be doing is advising any party that you have any obligations under Money Laundering Regulations, or advising them that they have an obligation under the regulations.

At some point in the future getting this wrong may mean you will have compliance problems due to potential breaches of (i) The Consumer Protection Regulations, because you are misleading consumers about legal obligations and (ii) The Data Protection Act, because you are taking sensitive personal data from a consumer and misrepresenting the purpose.

(This article is the second in a five-part series on money laundering, you can read the first instalment here.)

*David Beaumont is a director of Compliance Matters and the recently launched Property Professionals Support Centre