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Banks must know about and consider AML and CMP requirements

Friday 12 June 2020

Propertymark has responded to the Joint Money Laundering Steering Group (JMLSG) proposed draft guidance on Pooled Client Accounts outlining that the banks' expectations of letting agents do not coincide with legal requirements for AML (Anti-Money Laundering) and the CMP (Client Money Protection) regulations.

JMLSG is a private sector body that is made up of the leading UK Trade Associations in the financial services industry. It produces guidance to assist those in financial industry sectors represented on JMLSG to comply with their obligations in relation to the UK Anti-Money Laundering and Counter-Terrorist Financing legislation. The guidance is not legally binding but receives HM Treasury approval.

Propertymark is concerned that the guidance is asking letting agents to carry out Customer Due Diligence to the level as set out in the Money Laundering Regulations when all letting agents are not legally required to do so.

Scope of Regulations

Financial institutions must be aware that under the Money Laundering Regulations the scope of regulated businesses in the property agency sector was expanded in January 2020 to only include the letting agency sector for high-value transactions with a monthly rent of 10,000 euros (or an equivalent amount) or more, whereas all letting agents in England, Wales and Scotland must adhere to Client Money Protection rules.

Within the current framework for Pooled Client Accounts, letting agents find it very difficult to open client accounts with no legal requirement for all letting agents to register with HMRC for Anti-Money Laundering Supervision. This makes it very difficult for letting agents to adhere to the Client Money Protection rules.

Unless these regulations are explicitly stated in the guidance Propertymark is concerned that firms will continue to be unable to distinguish between those letting agents who need to comply with Anti-Money Laundering requirements and all letting agents who are required to comply with the Client Money Protection rules.

The guidance to banks and financial institutions must:

  • Outline the distinction between regulated and non-regulated letting agent businesses for Anti-Money Laundering supervision.
  • Explain to banks that for those letting agents not regulated for Anti-Money Laundering supervision it is only best practice that they carry out due diligence on all their customers. Consequently, many letting agents will not be able to ‘sufficiently enhance their practices so that the firm is satisfied that the customer can provide, upon request, evidence of the identity of the owners of funds in the Pooled Client Accounts.’
  • Clarify to banks that whilst the current legislative framework means that a majority of letting agents do not fall within the regulated sector for Anti-Money Laundering supervision they must be deemed as low-risk customers.

Read the full response