Letting agents will not be regulated under anti-money laundering law – despite overwhelming support, including from within the industry, that they should be.
However, the screws tighten on sales agents.
The unexpected move on letting agents was announced by HM Treasury in its response to the EU’s 4th Money Laundering Directive.
Barring a U-turn, letting agents – who, unlike estate agents, handle money – will be let off obligations to check out clients and the sources of their funds.
The Treasury’s consultation response states: “While it should be noted that the majority of respondents to the consultation supported the inclusion of letting agents within the regime, intelligence and evidence was not provided to justify the inclusion of lettings activity and the attendant costs of this proposal for those affected.
“The Government will only ‘gold plate’ where there is good evidence that a material ML/TF risk exists.
“In line with the directive, lettings agents will continue to be within the scope of the regulations where they carry out estate agency work in accordance with section one of the Estate Agents Act 1979 (as amended). However, the application of the Money Laundering Regulations will not be extended to include lettings activity.”
Yesterday evening, ARLA Propertymark managing director David Cox said: “We are disappointed the Government has chosen not to include lettings activity within the Money Laundering Regulations 2017. The risk is that money laundering activity will transfer from the sales sector, due to the increased powers within the new regulation, into the lettings sector which remains unregulated.
“However, within the context of the recently increased legislative burden on letting agents, coupled with the shock announcement to ban letting agent fees in the Autumn Statement, we understand why the Government has chosen not to impose these requirements at this critical juncture.”
However, the new anti-money laundering regime will step up a gear for sales agents, who will now have to specifically ensure that purchasers are now included in their due diligence.
NAEA Propertymark chief executive Mark Hayward said: “The Government has announced that purchasers are now included in the application of customer due diligence, so additional checks will need to be made by sales agents and auctioneers, which will be complicated by the fact that buyers are sometimes at arm’s length and there’s not necessarily a face to face relationship.
“However, further clarity will be required as to at what point the purchaser becomes a purchaser, and this is an issue we will be seeking guidance on.”
The whole money laundering situation is bizarre. As an estate agent, i go through money laundering checks with vendors and purchasers, who then also have to go through them with their solicitor and then should they be getting a mortgage go through the checks again with the lender. Not a problem with this, but as has been mentioned i dont handle any money at all, but obviously understand the reason that i need to do these checks
What i cant understand is why when the industry is pushing for it does the government want to go ahead with it. A reason is they dont want to push extra cost on letting agents, yet are happy with banning letting agents from charging fees for vetting tenants??
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Well said. It is absurd that there is any onus on Estate Agents to check where funds come from when no money passes through our businesses. I hope NAEA promote this line of thought. We should be relentlessly attacking any extra red tape. Don’t forget we have a Government who promised to cut the swathes of added Labour red tape. Instead, more is being heaped on us.
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Yesterday evening, ARLA Propertymark managing director David Cox said: “We are disappointed the Government has chosen not to include lettings activity within the Money Laundering Regulations 2017. The risk is that money laundering activity will transfer from the sales sector, due to the increased powers within the new regulation, into the lettings sector which remains unregulated.
I do wonder if Mr Cox understands what Money laundering is.
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woodentop have you missed his point?
With David Cox’s legal background I would categorically say he does understand what money laundering is.
If there are no regulations for letting agents what’s to stop the activity from them?
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Good. Has there ever been a reported case of money laundering from a letting? Its relativly low sums. Dont forget that Agents are still bound to report criminal or fraudulent activity.
I really dont see the need for more legislation on Letting Agents. I would imagin that most “letting agents” are still small and perhaps family run firms where as you have the larger corporates/franchises doing sales and lettings and not specialising. Certainly the case in my local area.
So perhaps a welcome break for the small independant.
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I agree that the ML system is bizarre. Why should agents have to jump through the hoops on a sales transaction where no money is passing through the agency and not for lettings whereby money changes hands?
You are right seenitall – there no need for further regulation but I would go one step further and remove it as a burden in its entirety, for sales agents too.
Yet again government interference without any comprehension about the our industry.
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I would like lettings agents being required to check that the landlord owns the property and the ID of the landlord also being liable if they let out a property without the owner’s permission even if they were mislead into do so.
However I don’t see the need for money laundering checks on tenants, as I can’t see how the money can be recycled, but a requirement that all rent must be collect from a bank account (or card) in the tenants name would be low cost, and make money laundering very hard.
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Ringi,
tenants can recycle money by the giving and receiving back of deposits
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Recycleing money is not an issue provided the deposit was not paid in cash. It will also be VERY hard work and costly to recyle much money. Even using “holding deposits” I don’t think any agent would take and return more then 2 or 3 from the same person.
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I have been thinking about RR’s comments about property auctioneers shortly being expected to put purchasers through an MLR check.
If you ever watch the ‘Homes under the Hammer’ on television you will see that many sales are made to buyers who only turned up on the day and, in some cases, buy site unseen. Plus, I suppose, telephone bidders who could be from anywhere in the world.
That means reducing the number of potential buyers in the room which cannot help the market to operate effectively. Potentially sale prices will be effected.
Perhaps ever person who visits a pre-sale open day can be given a MLR form to complete. Or only those who say they may be attending the sale. Whatever.
I do not know whether Clive Emson reads PIE but if so I’d like to hear his considered views. Whenever I was writing on property auctioneering I’d get Clive to check the drafts and found him very knowledgeable.
BTB
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