New Money Laundering regime requires estate agents to undergo criminal checks

Agents will have to undergo criminal checks to remain in business

The new Money Laundering Regulations regime, due to start this summer, will require all agents to undergo criminal record checks to remain in business.

The Regulations will come into effect from 26th June this year and will apply only to sales agents, not letting agents.

David Beaumont, who runs Property Industry Eye’s free compliance helpline, believes estate agents have been singled out.  He said: “The Regulations come into force in just 11 weeks’ time, but we do not know exactly what they will include as the Government is still consulting”.

The EU directive responsible for the new Regulations requires measures to be taken to prevent individuals who have been convicted of relevant offences from holding a management role within an estate agency or being a ‘beneficial owner’ of an agency.

Relevant offences, as outlined in the schedule, are those that impact the risk of money laundering or terrorist funding, or those that have an effect on whether the person is suitable for a management role within the agency.

Estate agents will need to ensure that beneficial owners of the business, such as shareholders, partners, directors or managers have all passed a criminality test and have been approved by HMRC.

Beaumont believes agents will be shocked at this new obligation and questions why only estate agents are being targeted.  He said: “If this test is appropriate for agents, why is it not appropriate for businesses in other sectors?”

With the responsibility to obtain approval lying with the individual rather than the business, numerous applications per agency will be submitted to HMRC, and it is not yet known if HMRC will charge a fee to process the applications.

Beaumont added “HMRC are currently working on guidance, but as the Regulations are in the consultation period until tomorrow, they are unable to provide any clarification.

“HMRC can even get court orders to force individuals to sell their interest in an agency if they are prosecuted for a relevant offence, and anyone acting in breach of a prohibition risks a £5,000 fine and two years in prison.”

Estate agents will be able to remain operating with people in place who do not have the necessary approval until 28th June 2018, provided those people have already applied for approval prior to that date.

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