Agent hit with largest-ever money laundering fine wins appeal as Judge apologises for injustice

The agent hit with the largest ever anti-money laundering fine has won its appeal after a gruelling two-year battle against HMRC.

The new judgement can only be described as utterly scathing of the original decision.

The tax tribunal which has ruled in the agent’s favour said the fine – which remains the largest to be imposed on an agent in relation to money laundering – was “outrageous”. It also apologised for the terrible consequences for the agent in terms of its stress and worry.

Jackson Grundy, with branches across Northamptonshire, was fined £169,000 by the Office of Fair Trading four days before the then regulator became defunct – with the decision announced on the OFT’s last working day in March 2014.

In its press release, the OFT said the fine was due to “significant and widespread failures”.

That claim has now been shot down in flames, with the Judge expressing his regrets for the injustice. He ridiculed the idea that simple filing mistakes by Jackson Grundy would actually have led to money-laundering criminals trying to hide their dirty money in villages across Northamptonshire.

The huge fine was 17 times larger than any previous penalty imposed on an estate agent – and sent shock waves through the entire industry.

The tribunal, led by judge Howard M. Nowlan, has now decided that the fine should be reduced to just £5,000.

The tribunal had in fact considered quashing the entire fine. It has now invited Jackson Grundy, which had to employ legal experts and whose business may have suffered because of the publicity, to apply for costs.

Yesterday evening, managing director of Jackson Grundy David Jackson welcomed the decision but spoke of the sheer stress he had undergone.

The tribunal – which said that Jackson was an honest and impressive witness – could not hide its disgust at the original treatment of the agent.

It describes the initial penalty as “seriously disproportionate”, “vastly excessive” and “wholly disproportionate and unjust”.

The tribunal also refers to the “very material suffering and worry” that had been inflicted on the agency.

The failings, says the tribunal, were trivial, rather than substantive, largely relating to record keeping and documentation.

The firm’s managers correctly sought proof of vendors’ identities, but did not always keep copies of passports, driving licences and utility bills. Being local, its experienced branch managers knew many of its vendors.

In its ruling, the tribunal says that at the date of the OFT compliance visit to Jackson Grundy, on June 22, 2012, the business had recently experienced very difficult trading conditions: “The general downturn in the whole housing market, and thus in particular the profitability of the sales agency limb of the business, had led to roughly 45% of the employees being made redundant.”

The business was being reorganised, with lettings being merged with sales – with no anti-money laundering obligations on lettings. The tribunal acknowledges that most of the firm’s focus would have been on the redundancies and restructure of the business, but does not suggest that as a result there were significant money laundering failures.

The new ruling goes on to say: “Furthermore, when the failings were in fact more failures of recording, rather than substantive failings likely to enable fraudsters and terrorists to invest in real property in Northamptonshire villages and to slip through the net of protection, the feature that the penalty was 17 times higher than any earlier penalty imposed on a firm of estate agents seems to us to have been outrageous.”

The ruling also says: “We conclude by saying that we consider that the Appellant has suffered a very considerable injustice in this case.

“The worry that Mr Jackson will have suffered as a result of the imposition of the excessive penalty, the embarrassment that he may have felt viz a viz his fellow directors and office managers, as the person in the business principally responsible for attending to the Appellant’s money laundering responsibilities, and the resultant freezing or reductions of remuneration that all have suffered will all have imposed a heavy burden on Mr Jackson.

“We greatly regret this.”

Yesterday evening, David Jackson said: “My fellow directors and I are delighted with this decision by Judge Nowlan at the public tribunal, and that our appeal against the ‘excessive penalty’ has been ‘allowed’.

“Over the past two years, the stress, worry and abiding sense of injustice have weighed extremely heavily on me personally, and on many, if not all members of our staff.

“The judgement is now of public record and can be assessed by whomever may choose to do so, however for us, such pertinent statements included within as ‘the penalty was wholly disproportionate and unjust’ and the finding that we have ‘suffered a very considerable injustice’ are clear statements in support of our appeal and explicit criticisms of both the OFT and HMRC in this case.

“Having now quashed any question marks over the integrity of either myself or my company, we now intend to continue to do what we have always excelled at, without distraction – endeavouring to offer our clients an unrivalled service whether selling, buying or renting a home in Northamptonshire.”

The firm said at the time of its original penalty that it had co-operated with the OFT, believing that its official was there to assists it, and that its lapses were purely to do with minor admin breaches.

The OFT had initially told the firm it would be fined £200,000.

The OFT’s duties on money-laundering were handed to HMRC on April 1, 2014, and so Jackson Grundy’s appeal was versus HMRC.

It was one of three agents fined massive amounts – the others being London firm Hastings International, which was fined £47,966, and Jeffrey Ross, of Cardiff, hit with a £29,000 fine.

It is not clear whether these other two firms went ahead with their own appeals, or were awaiting the result of the Jackson Grundy case.

Because this is such an important case for agents, we attach the full ruling.

Decision in Jackson Grundy Limited

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11 Comments

  1. Trevor Mealham

    Ouch.  Sounds like the OFT didn’t go out so much with a bang, than a Botch

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    1. msr@surveyorsinfrance.com

      Typical of over egoed incompetents, give them a bit of power and it is abused.

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  2. pierce

    This is an excellent result and well done Jackson Grundy for hanging on in there!

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  3. Rob Hailstone

    Common sense prevails, at last!

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  4. Jacqueline Emmerson

    If we had more police, fraud investigators, border control to monitor known players coming into and out of our country then it wouldn’t be necessary for estate agents or solicitors to have to get involved in what is essentially the responsibility of the state. That’s  why we all pay our taxes. The state is ducking its own responsibilities by doing it on the cheap and many innocent folk are suffering as a consequence. I hope this poor firm recover substantial costs. They must have the hearts of lions to have battled through the recession and have dealt with this. Well done for still trading.

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    1. Paul

      Seriously, how can you dislike that comment?

      Are you guys actually saying the responsibility of monitoring criminal activity be left in the hands of Estate Agents?

      I’m all for getting agents to do their bit, but to impose fines and possible imprisioment on them is utter nonsense.

      How about we ask HMRC to sell some houses for us and when they don’t, fine them and throw them in jail?!……

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      1. AgencyInsider

        Agreed Paul. Quite extraordinary to dislike Jacqueline’s comment, which is spot on.

        Can only think that perhaps the over-zealous jobsworth who so blindly ‘followed the rules to the letter’ has been on here.

        Watch – I bet this gets a dislike in the next ten minutes.

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  5. RealAgent

    A nightmare for the firm finally over and I hope they can rebuild what they once had. Good luck to them.

     

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  6. ElTel

    I would encourage all reputable agents to read the judgement in full as a warning to the many I suspect who pay lip service to th MLR .  I will certainly be reviewing my own firms compliance regime.  The actions of the two named OFT officers were unquestionably outrageous however I doubt if their career’s were effected in any way.  HMRC should hang their head in shame.

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  7. Gump

    A sweet victory indeed! Well done for sticking with it

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  8. Property Paddy

    Jacqueline Emmerson makes a fair point.

    Are we here to police immigration ? Or let and sell houses.

    reasonable due diligence yes but we are not the front line and nor should we be.

    What do you think “Big Brother” ?

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