Estate agents have been hit with unannounced inspections as part of a recent crackdown on money laundering in the property industry, HMRC has revealed.
The action involved HMRC officers visiting 50 property firms across England, who were suspected of trading without being properly registered pursuant to the Money Laundering Regulations 2017 (MLR). The MLRs expanded the scope of UK anti-money laundering regulation significantly, introducing a legal requirement for estate agents to “…take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”.
HMRC is a key component is the UK’s anti-money laundering strategy. Over the last three years it has carried out more than 5,000 interventions on supervised businesses, with 655 penalties worth £2.3 million issued in 2017 to 2018.
The highest profile recipient of a penalty following the recent property sector crackdown was Britain’s largest estate agent, Countrywide, who were fined £215,000 for failing to carry out proper money laundering checks. The second largest fine went to Tepilo, the online agency set up by TV presenter and property developer Sarah Beeny, who were fined £68,595.
Simon York, Director of HMRC’s Fraud Investigation Service, said recently:
“Estate agents need to understand that criminals prey on weaknesses, so it’s vital they take all steps to protect themselves. The money laundering regulations are key to that, but there’s still a minority of agents who ignore their legal obligations. These inspections are a wake-up call that if you continue to trade illegally we will come knocking.”
This intelligence-led action by HMRC is likely to be the first of many such coordinated operations targeting the property sector, which is viewed as underreporting suspicious activity compared to the accounting and legal sectors. In 2017-18 estate agents submitted just 710 suspicious activity reports, compared with 5,036 reports by accountants and 2,660 by legal professionals.
The Law Commission is currently consulting on whether to make firms in the reporting sector criminally liable for employees failing to report suspicious activity, with the final recommendations expected this year. If adopted this would be a major development in the law and add to the already significant regulatory burden on property sector firms.
Our experience tells us that the response across the sector since the introduction of the MLRs 2017 has been mixed, and that many estate agency businesses continue to grapple with the implementation of effective AML/CTF controls and the training requirements of their staff.
Blaser Mills Law offer AML advisory services for property companies who wish to safeguard against failing possible HMRC compliance checks. We can support your business through implementing effective AML policies, controls and procedures (PCPs), which are designed specifically to satisfy HMRC’s requirements and safeguard your present and future regulatory security.
We are currently working with several of our property clients to fully review and strengthen their AML processes and deliver on-site training to their management and workforce. If you would be interested in hearing more about our AML compliance services contact us on firstname.lastname@example.org