The Fifth EU Anti-Money Laundering Directive (5AMLD) was written into UK law on the 10th of January 2020. The property sector – long considered a safe haven for criminals looking to legitimise wealth – is among those industries being addressed by the new legislation.
Estate agents, mortgage brokers, conveyancers and financial institutions that have not already implemented the regulations need to act fast in order to stay compliant and avoid a hefty fine. In this article, we’ll explain the requirements and why it is important to keep your business compliant.
A Global Crackdown
Money laundering is a serious crime that provides funding to criminal gangs and terrorist operations. However, for many years it has been seen as victimless.
More recently, however, governments around the world have begun to wake up to the negative impact that corruption has upon their nations and are cracking down on the channelling of illegal wealth.
In the EU and the UK, we now have 5AMLD. An extension of the previous 4AMLD, it puts several new requirements in place including:
- Regulation of cryptocurrencies
- More strenuous requirements on prepaid cards and remote payments
- Extension of the checks conducted by regulated businesses to include the businesses that they trade with
However, despite 5AMLD being made law weeks ago, Mondo Visione reports that many companies have yet to implement the requirements, and the EU is planning a crackdown on those countries and companies that have failed to comply with the directive.
Those companies which fail to meet the new regulations will face a hefty fine of up to €5m, or 10% of their annual turnover – so property companies must become compliant before it’s too late.
Know Your Customers
For estate agents, the extension of checks is the most important requirement. They need to prove that their business has not been involved in transferring illegal funds.
If they do have any doubts, 5AMLD requires them to file a Suspicious Activity Report (SAR) with the National Crime Agency.
To remain compliant, businesses must have systems and processes in place that enable them to prove beyond reasonable doubt the legitimacy of their customers. These include:
- Conducting effective due diligence, including keeping records of a buyer or seller’s identity, as well as the legitimacy of the funds used.
- Implementing a more rigorous due diligence process when the buyer or seller is a politically exposed person. For example, a senior political figure or someone with a prominent public role. This also applies to any transaction involving individuals from countries that have been blacklisted as high risk.
- Appointing a Money Laundering Officer to be responsible for overseeing 5AMLD processes, tracking any changes in the regulations and submitting SARs where required. There should be at least one person per organisation who is fully trained in this role – although two is advisable to avoid problems arising from absence and workload.
- Training staff so that they are aware of money laundering, how to spot it, their responsibilities and the processes they must complete.
- Maintaining accurate and timely records so that they can quickly provide details of a sale if required.
An Industry Ripe for Corruption
The scale of money laundering operations in the UK property industry should not be underestimated. In a recent report, anti-corruption organisation Transparency International said that property acquired using suspicious wealth in the UK had a combined value of over £5bn.
At the end of last year, the NCA recovered a property portfolio worth up to £8.1 million, which included 16 properties across the West Country.
NCA investigators believe that the portfolio was acquired through a combination of mortgage fraud and the sale of controlled drugs.
The portfolio featured several luxury properties, including an 18th-century townhouse in Bath and a seven-bedroom converted barn with a pool and jacuzzi.
A subsequent investigation revealed that the portfolio had generated a rental and commercial income of more than £2m. The defendants were additionally ordered to repay £368,000 in rents accrued from the lettings.
Simple, Comprehensive Support
The UK government will continue to align its financial crime legislation with other international efforts, so the property industry will have to remain alert to evolving compliance requirements.
To help businesses navigate these regulations, Red Flag Alert has developed an AML service to assure businesses that they are compliant. The service was developed in conjunction with Begbies Traynor plc and GB Group plc – we’re confident it’s the simplest and most comprehensive solution on the market in the UK. Red Flag Alert offers:
- A full range of risk level checking
- Unbeatable match rates
- ID verification
- Enhanced due diligence
- Sanctions and PEPs real-time screening
- Monitoring alerts
- Simple interface
- Secure audit trail