More than 3,000 estate agents at risk of fines and prison for failing to register with HMRC for AML supervision

Digital compliance specialist SmartSearch can help estate agents comply quickly and efficiently

Around one in five estate agents are not registered for money laundering supervision, putting themselves at risk of fines and even imprisonment, according to brand new data analysis by digital compliance specialists, SmartSearch.

SmartSearch has analysed the HMRC Supervised Business Register and discovered that despite an increase in the number of estate agents that have applied for AML supervision, almost one in five still have not.

The register shows that 20,069 estate agents are approved for supervision while a further 1,177 have applied. Given there are around 24,500 estate agents in the UK, this means more than 4,400 are not registered with HMRC for money laundering supervision – representing around 18% of the market.

Even when the 1,177 that have applied for supervision are factored in, that still leaves more than 3,000 (13%) that are neither registered or in the process of registering with HMRC.

It is a criminal offence to provide estate agency services without being registered with HMRC for AML supervision and the consequences are severe. Any estate agent found to be trading without either having been approved for AML supervision – or in the process of applying - face civil penalties or criminal prosecution. This could result in unlimited fines and/or a prison term of up to two years.

Risk assessments

Based on these figures that means at least 3,000 estate agents are at severe risk of fines and possibly imprisonment, while more than 1,000 are in limbo, given their approval is still pending.

Between January 2023 and March 2023 (which is the latest data available) HMRC fined 131 businesses – around half of which (72) of which were estate agents - for money laundering failures. Overall, just three of these breaches were for failing to carry out AML risk assessments properly – the vast majority (98%) were for ‘failing to apply for registration at the required time’.

In total, these breaches for failing to register totalled £782,929 – the largest single fine was £52,000 - while the average fine was just over £6,000.

The data shows us that there are thousands of estate agents in the UK that are trading without being registered with HMRC. Not only is this illegal, with serious consequences including large fines and even imprisonment – but it leaves these businesses wide open in terms of their risk of enabling money laundering.

Money laundering is a serious crime, and the UK property market is one of the most targeted sectors in the world by financial criminals. They use the loopholes – such as the ability to buy property through an anonymous shell company – to abuse the system, and as a result millions of pounds worth of UK property is thought to have been bought with dirty cash.

Therefore, estate agents - perhaps more than any other sectors – have a huge responsibility to put the right procedures in place to identify and prevent money laundering, this includes verifying customers, and ensuring they know where those customers’ funds are coming from.

Money laundering is not just an offence in itself, but an enabler of serious organised crime such as people trafficking, drugs trafficking and funding terrorism - and estate agents should be doing everything they can to stop criminals being able to move their illegal money around.

It is understandable why estate agents – particularly smaller ones – do not want to register with HMRC, as they see the process as hugely stressful and expensive.

Stuck in a loop

There is a fear amongst estate agents that if they have been breaching AML rules for years that they are stuck in a loop and will never be able to get themselves into a clean and compliant position, but this is simply not true.

Meeting regulations can be quick and simple – even if they have been trading without running proper checks for years. At SmartSearch, not only do we offer verification, screening and monitoring of individuals and corporate clients, all from one platform, but our ‘batch upload’ service also means we can retrospectively verify estate agents’ existing customer databases.

The SmartSearch batch upload service is a simple solution for estate agents that:

• Are newly registered for money laundering supervision and need to run verification and screening checks on their entire customer database.
• Have gaps in their compliance and wish to run fresh checks on their entire database.
• Have verified all their clients, but not run screening checks.
• Are worried their compliance checks may not be meeting requirements and want to ensure there are fully compliant.
• Have historical customer records that they need to upload quickly and efficiently from legacy systems and merge with their existing database.
• Following a merger or acquisition, have multiple customer files that all need to be checked, screened and monitored together.

The batch upload offers three options:

1. PEP and Sanctions batch upload – this is for estate agents that have already verified their customers but want to run PEP and sanction screening on multiple clients at once.
2. Individual AML Batch upload – this is for estate agents that need to run a full AML check on multiple clients at once and includes identification, verification, screening and ongoing monitoring for sanctions and PEPs.
3. Business Batch upload – this option enables estate agents to retrospectively check and upload all existing business clients onto the platform. It delivers a full business profile for each corporate customer and monitors them all on an ongoing basis. Once the business details have been run, the system will identify Directors and Beneficial Owners, who can then be checked and monitored as individuals.

With SmartSearch’s batch upload service, even estate agents that have been trading for years without running proper checks can get themselves into a clean, compliant, audit-ready position, because they can upload all those records onto the platform and check them all in one go, verifying customers and screening them against sanctions and PEPs.

With our batch upload service, estate agents can get themselves ready for supervision, and then going forward our platform can provide everything they need to comply fully with AML regulations, including full AML checks, screening for sanctions and PEPs, enhanced due diligence as well as Ultimate Business Owner and Source of Funds checks.  We can even integrate our system with their existing ones, making it easy to onboard new clients compliantly.

Therefore, there should be no fear from estate agents that have so far failed to register for money laundering supervision to do so.