Money laundering ID – what to do when acting for private individuals

Conducting Customer Due Diligence on clients and beneficial owners is a requirement for all estate agents.  

The articles in this series have touched on Customer Due Diligence obligation, but here we focus on the routes available to you to meet that obligation where the client is a private individual.

The first thing to understand is that this is “Due Diligence” and as such it's not just a case of doing a, b and c in all cases and you are compliant.  

The HMRC Guidance on this does not stipulate what you must do in all cases it merely provides you with options to consider when dealing with specific types of client, but in some cases other routes can be taken.  

Clearly following HMRC's guidance is very sensible, but not mandatory. 

If you can show that you took other due diligence steps to identify the client and verify their identity then you meet your CDD obligation.

The recent fraud situation where a tenant changed her name by deed poll to the name of the landlord and managed to sell the property and abscond with the proceeds illustrates the point.  

Both the estate agent and the solicitor will have followed the HMRC Guidance on CDD, but this did not prevent the fraud taking place.

The list of different types of client and reasons why particular routes don’t work out is as long as your arm.  

Common issues being that the documents aren’t available, partners are at work, clients can be difficult to pin down or they live abroad, etc.  

There are clients who do not have photo ID for very legitimate reasons and so having some options to meet your obligations is particularly useful.  Here are a few: 
 
1. You meet the client/beneficial owner personally. They then produce the usual photo ID and confirmation of home address document.  You evidence this by taking copies or photographs of the documents or making notes of what you have seen. You then retain this evidence on file and the job is basically done.

2. The client lives some distance away, but you work for a large agency with a branch close to the client’s home.  You can get a colleague to go and meet them and they can follow route one (above) on your behalf.

3. You don’t get to meet the client personally for a legitimate reason (Make sure it is a legitimate reason, not simply an excuse, because that might be a sign of a potential suspicious activity) -

a. Get the client to obtain and send over to you authenticated copies of their ID.  They can get this carried out by a solicitor or other recognised professional source. The post office can provide a very basic service of this nature, but as CDD involves risk, you must be comfortable with the risk if this route is used.
 
b. Find out if they already have a solicitor who has carried out CDD.  If so, get the solicitor’s details and ask the solicitor to confirm, in writing, what they did and that it was acceptable. In theory you can even ask auditors, accountants or banks to do this for you. Interestingly, you can’t ask another estate agent to do it for you, because estate agents are not on the list of ‘trusted’ business sectors within the regulations.

4. The other option is to use one of the many online ID confirmation service providers. I will explore the pros and cons of using this route in my next article.

(This article is the fifth in a six-part series on money laundering, you can read part one here, part two here, part three here and part four here.)

*David Beaumont is a compliance expert who provides agents with everything they need to comply with money laundering obligations. For more guidance, email: david@compliance-matters.co.uk