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The Fifth Money Laundering Directive – what does it mean for estate agents?

Friday 03 August 2018

The EU’s Fourth Money Laundering Directive may have only been implemented into national law just over a year ago, but the UK will soon adopt amended legislation as a response to the Panama Papers scandal and to further combat terrorist financing.

The reforms amend the Fourth Money Laundering Directive, and brings further direction for agents – including those who also deal in high-value lettings.

This means that agents who facilitate rent transactions of €10,000 plus per month will now have to apply the same diligence as they do for sales, meaning London operating agents will be particularly susceptible to the new laws once implemented, on or before 10 January 2020.

Although entered into force on 9 July 2018, Member States will have 18 months to implement the Directive into national law. The UK Government have said that they will adopt the Directive in UK law, but as of yet it is unsure how this will pan out in the event of a no-deal Brexit. The UK is set to formally leave the European Union 29 March 2019, however a transitional period will operate until 31 December 2020.

In a joint statement, Vice-President Timmermans, Vice-President Dombrovskis and Commissioner Jourova, said: “We are marking an important step in fighting against financial crime... these new rules will bring more transparency to improve the fight against money laundering and terrorist financing across the European Union. But our work is not over. Fighting effectively against financial crime needs proper implementation of these rules and strong coordination amongst the different authorities. We want all EU Member States to uphold high standards in the fight against money laundering and terrorist financing across the EU”.

The Fifth AML Directive introduces four ‘obligated entities’ into the scope:

  • virtual currency exchange platforms (VCEPs) and custodian wallet providers (CWP);
  • art traders (when the value of transactions or series of linked transactions amount to €10,000 or higher;
  • those who provide similar services to auditors, external accountants and tax advisors as a principal business or professional activity; and
  • estate agents who facilitate the letting of property where the monthly rental is €10,000 or more (this means some letting agents will be brought into the scope, and agents that deal with high-value lettings as well as sales).

And further change is reflected in Customer Due Diligence, with the amendment stating electronic identification must now be approved by national authorities, and verification of clients must come from independent and reliable sources. Earlier this year we launched Propertymark Passport, a facial recognition app which enables members to verify customers' identities and support compliance with HMRC Regulations around Anti Money Laundering.

The Directive also dictates that Enhanced Due Diligence will be required when dealing with transactions from high risk third countries. The European Commission has provided a list of these countries which present an increased risk of money-laundering, this is regularly updated and includes: Afghanistan, Iran, Iraq, Syria and the Democratic People’s Republic of Korea amongst others.

Welcome news is that agents who report money laundering and/or submit Suspicious Activity Reports (SARs) will receive increased protection and the right to anonymity under the Directive. We are currently working with the National Crime Agency (NCA) to educate agents about when a Suspicious Activity Report is necessary and the consequences for failing to do so, so keep your eyes peeled for more information on this shortly.

How we're helping you

For advice about money laundering and how to report suspicious transactions, why not take a look at our handy AML toolkit - it's full of great resources to help you comply with the regulations.

We also run interactive Workshops, designed to ensure that you are on top of your legal obligations, and have two great courses to aid compliance. Our 30 minute online Anti-Money Laundering course provides an introduction to spotting AML 'red flags' and how to minimise the risk of criminal activity within your agency, and our half day Anti-Money Laundering course offers a more in-depth look at the legislation, covering financial sactions, reporting methods and HMRC supervision.

For further help and support, you can also contact HMRC directly. Please note that if HMRC need to get in touch with you about anything confidential, they will reply by phone or post.