What should agents be doing to stay compliant with AML regulations?

As money laundering compliance marks its twentieth year, more and more estate agents are being fined for breaches of HMRC’s ID and AML regulations, with £3.2m fines handed out over 2022-2023, amidst soaring identity fraud cases.

Lack of understanding of what compliance means and involves is no excuse in the eyes of the law. That’s why mio has teamed up with compliance expert, Michael Day MBA FRICS FNAEA FARLA, from Integra Property Services, to explore what estate agents should do to stay compliant and why it’s good for business, in an exclusive video series. Let’s look at some of the key topics discussed.

What’s the difference between proof of funds and source of funds?

Proof of funds show movers have the funds available to buy a property, but the source of those funds is often the key to identifying fraudulent activity. While the funds can be shown to exist, knowing where they come from is vital, as Michael explained, “You can't commit the offence if you haven't got the money. It's where that money came from – the source of wealth - that is key.”

Do agents need to register with HMRC?
Every office needs to be individually registered, and every year too with your information kept up-to-date.

Michael Day adds, “Registration is a mandatory annual requirement. Lettings agents are not covered by the Estate Agents Act 1979 which was the original definition of estate agents used by HMRC. However, since high-end lettings came under money laundering requirements in 2020,  those agents also need to register. Sales and Lettings agency businesses, that are one and the same company, don’t need to re-register for the lettings if they are already registered for the sales. However, if the lettings business is a separate legal entity and they deal with the type of business that requires AML compliance, then they would need to register that other business separately.”

What are the mandatory requirements estate agents need to follow?

In addition to registering with HMRC for supervision, agents must have a robust policy and procedures document and a company risk assessment, as well as designated roles of responsibility. Michael says, “Agents must have a money laundering reporting officer and depending on the size of the business, possibly a deputy appointed officer. It's through that person that any suspicious activity reports or actions from HMRC would take place.”

In addition to having policies and procedures in place, agents should carry out regular audits to ensure they are being upheld. Michael continues, “Ignorance is not an excuse. It's up to estate agents to make sure they stay ahead of this. Any changes in legislation are usually well publicised by the government, by HMRC and in the trade press.”

Information about money laundering supervision for estate agency businesses can be found here.

Is upfront material information mandatory?

It has been a requirement not to omit information that would be material to somebody's buying or selling decision since Consumer Protection Regulations came into force in 2008.  

With more information now being required as available upfront, transactions can proceed more quickly. Michael cites the financial dividends from a faster pipeline turnover too, saying, “In simplistic terms, if we went back to sales taking 13 weeks, your pipeline would turn four times a year, and would be your annual turnover. Roughly at 22 weeks, it means it's turning two and a half times a year. Not only is material information mandatory and a requirement legally, it's actually good news from a point of view of getting deals done and getting deals happening.”  

Estate agents must take every measure to protect themselves, their businesses and their clients, as Nick Ball, Sales Director at mio reflects, “Estate agents must ensure they understand and have systems in place to prevent fraud with robust ID and AML checks, and avoid costly sanctions by the HMRC, which could even result in a prison sentence.”

“With such high stakes, I would encourage estate agents to take time to watch our video series and make use of our free online resources. These will help agents to better understand what’s required and how mio’s digital solutions can keep agents on the right side of changing regulations, save time, speed up the transaction and complete more sales in an increasingly challenging market environment.” 

You  can watch mio’s bite-sized video interviews with Michael Day, and access other useful, free educational compliance-related content here.

ID and AML checks, powered by Thirdfort Standard, are the latest addition to the mio sales management hub. mio supports estate agents from the very start of the sales process through to completion, with a range of integrated services and products all in one convenient easy to use digital platform. These range from a Sellers Information Pack (SIP), including a HBSG approved digital Property Information Form (PIF), Land Registry insights and Title Checks from Veya, to a single chain view, integrated sales progression platform with Consumer App.

mio delivers estate agents the tools to make client onboarding, sales progression and compliance simple, while speeding up the sales process, generating additional income and improving the customer experience.