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NAEA Propertymark responds to Economic Crime Inquiry

Tuesday 19 June 2018

In April, the Government launched an investigation into the scale of money laundering, terrorist financing and sanctions violations in the UK, and the means by which it is enabled, after reports that billions of pounds of criminal proceeds are flowing into British property.

Last month we submitted evidence to the Treasury's Economic Crime Inquiry (you can read our full response here) which looked at the current anti-money laundering and sanctions regime, and questioned the effect economic crime has on consumers.

Within our response we raised concerns over the length of time agents were given to adapt to the changes and queried the confidential nature of fines given to those agents flouting the rules. We highlighted the requirement for better guidance for reporting suspicious activity, and the need for more tools to help regulated agents understand enhanced due diligence.

Following our written submission, NAEA Propertymark Chief Executive, Mark Hayward, was invited to provide oral evidence to the Treasury Select Committee inquiry into Economic Crime, to speak alongside Stephen Curtis from the Association of Company Registration Agents (ACRA) and Director of Strategy & Professional Standards at The Association of Accounting Technicians (AAT), Adam Harper.

Chair, Nicky Morgan MP, described the three sectors - estate agency, company registration and accountancy - as the “weakest links” for money laundering in the UK, and wanted to ascertain how anti-money laundering activities are carried out within these industries, and the ways in which each area tackles the issue.

During the session, Hayward expressed concern that HMRC lacks the resources and knowledge needed to effectively police the sector and attributed lack of resources to HMRC’s problematic IT system. ACRA's Stephen Curtis agreed, stating that in supervision, HMRC is somewhat deficient due to them not being specialists in the areas they are overlooking, with HMRC covering seven different business types for money laundering supervision, including all estate agency businesses and various other businesses not supervised by the Financial Conduct Authority (FCA).

Hayward stressed that whilst NAEA Propertymark members are on alert for organised crime, this is not consistent across the sector. He explained that to support NAEA Propertymark members in ensuring they are up to speed with the Money Laundering Regulations we provide:

  • free masterclasses around the country for our members
  • regional Anti-Money Laundering (AML) courses, as well as online training
  • in the Lobby section of our website, members can access:
    • our Identity Verification Form
    • our Propertymark Passport application, which is currently free for all NAEA Propertymark members to use until the end of August 2018, (after which a small fee will incur).

Mark agreed that the UK is particularly open to money-laundering, despite what others may describe as arguably stringent AML law in comparison with other countries. However, he did reiterate the issue of only interim guidance being available for estate agents, having previously stated it in our submitted written evidence. The number of Suspicious Activity Reports (SARs) being submitted by estate agents is relatively low when compared to the number of transactions.

When questioned further on this matter by Rushanara Ali MP, Mark said, “it’s a question of educating the sector to do it”, something we at NAEA Propertymark continue to pursue. Mark also added that when members have submitted SARs they “go into an abyss and are never seen again”, which is likely to only discourage businesses further.

Mark stressed that if HMRC shared genuine case-studies and data with organisations practicing AML, it would encourage further proactivity within the sector, as transparency is currently lacking. Commenting that the system works to a certain extent, Mark stated that issues concerning checks of Politically Exposed Person’s (PEPs) would also be aided if a fully accessible and Treasury approved list was made available.

Mark also made it known that money-laundering in the housing sector is not exclusive to sales initiated by agents. Home-builders also sell property and their contracts are open to being flipped, and names in contracts changing. The Chief Executive stated that the easiest way to buy property in the UK is through auction, and that sales made, “off-market” for the privacy of the purchaser may well attract attention.

Hayward summed up his argument by stating that he felt the industry would be in favour of their professional bodies expanding their roles and taking on anti-money laundering supervisory roles, rather than relying upon HMRC to act as a regulatory body for several diverse sectors.

The Treasury Select Committee and the cross-party group of MPs will continue to investigate criminal financing, and will subsequently begin compiling a report from evidence obtained through the Inquiry.

Watch the full session