Whilst the property industry isn’t consistently regulated across the UK, agents do have to abide by many rules including those on anti-money laundering. The Russia Report, issued on 21 July, shows the continued threat of illicit financial activity and Ministers are considering strengthening legislation.
Due diligence
The Report outlined that the arrival of Russian money into Britain resulted in a growth industry of enablers – individuals and organisations who manage and lobby for the Russian elite in the UK. A large private security industry has developed to service the needs of the Russian elite and on occasion help launder money through offshore shell companies and fabricate ‘due diligence’ reports, while lawyers provide litigation support. Part of The Money Laundering Regulations 2019, which passed into UK law on 10 January 2019 saw requirements for agents to check the Beneficial Ownership Register before establishing a business relationship. Agents must report to Companies House any discrepancies between what they find in their Customer Due Diligence research and what is listed on Register.
Beneficial Ownership Register
For properties owned by overseas companies and legal entities, the Government plans to launch a public register in 2021 to crack down on the illicit activity of high-end money laundering, that the UK property market continues to attract. Parliamentary Under Secretary of State, Lord Callanan, made on a statement by 21 July 2020, confirming the register will be novel, and careful consideration is needed before any measures are adopted. It is imperative that the register is as robust as it reasonably can be, with reliable data and sufficient deterrent effects to make it clear that the UK property market is not a haven for dirty money. The Government has committed to legislation through the Money Laundering Directives with progress reported annually. As part of the Economic Crime Plant 2019-2022, the Register will be a key measure. A Draft Registration of Overseas Entities Bill underwent pre-legislative scrutiny by a Joint Committee in Spring 2019 which Propertymark supplied written evidence to support the Bill, however, in the current form it would not achieve its aims. The Government is exploring the best way to implement the recommendations.
Economic crime plan
I unequivocally welcome the government’s commitment to combatting the exploitation of the property market and encourage them to ensure the register is as thorough and robust as possible. Property is often seen as a gateway to money laundering and it is essential that estate agents are aware of their duty in carrying out the right checks and reporting any suspicious activity. Having sat on the Economic Crime Strategic Board, I am pleased to see the government has taken our call for action seriously and am hopeful that today’s statement will encourage greater diligence in the sector, eliminating any unwarranted interference such as that referenced in today’s Russian interference in British politics report.
Mark Hayward, NAEA Propertymark Chief Executive
Property agents must now carry out Enhanced Due Diligence (EDD) where there is an unusual pattern of transactions, or the transaction has no apparent economic or legal purpose - not just on transactions that are complex or unusually large. Therefore, extra due diligence is needed where agents feel Russian influence plays a part, to protect themselves from being victims of money laundering and investigated by HMRC.
Agents AML responsibilities