New money laundering legislation comes into force today. Regardless of Brexit, property agents must abide by the Fifth EU Money Laundering Directive, ensuring they risk-assess their business processes and carry out thorough ID checks on customers.
Agents will need to carefully consider how they might find themselves exposed to money laundering and to the risk of financing terrorism and ensure they have measures in place to manage and eliminate any risks.
Letting Agent Today explains that agents must carry out customer due diligence on landlords and tenants where renting is “for a period of a month or more, and at a rent which during at least part of that period is, or is equivalent to, a monthly rent of 10,000 euros or more”.
If a third party is acting on behalf of another person in a particular transaction, that person is described in the legislation as the ‘beneficial owner’, ie the person on whose behalf a transaction is carried out. Beneficial owners must in future be identified and any potential risks they pose be assessed. It will also be important to assess the risk of money laundering that could result from:
- Sending money to customers to or through high-risk third countries which don’t have effective systems in place to prevent money laundering or terrorist financing;
- Company services or transactions;
- The financing methods used to support the business; and
- Other transaction-based activities such as non-face-to-face services.
All customers and beneficial owners are now subject to identity checks via an official identification document such as a passport or driving licence. Photo ID, as well as verification of the current address, will be needed for both new customers and existing clients if their circumstances change. Due diligence also applies should agents have any doubts about the authenticity of an existing customer’s ID information or suspect that money laundering or financing terrorism may be taking place.
Under the new rules, risk assessments must be recorded, kept on file and regularly reviewed. Any changes to a business, it’s financing or the environment in which it operates will trigger an updated assessment, which must be made available to HMRC on request.
Of course the property sector should not provide an easy route for money laundering. But at a time when the industry is steeling itself for yet more reforms, this new legislation is yet another hoop for agents to jump through. And this is being piled on top of the 125-plus other rules and regulations that agents are faced with on a daily basis. That said, it is hard to argue against legislation that should go some way at least to safeguarding the sector from criminal activity.