Estate agents will have to undergo – and almost certainly have to pay for it themselves – criminal record checks in order to stay in business.
The new requirement falls under the new Money Laundering Regulations regime, which starts shortly this summer and which all sales agents must comply with.
The warning comes from David Beaumont, who runs Property Industry Eye’s free compliance helpline, and who says that estate agents appear to have been singled out.
Beaumont said: “The Regulations come into force in just 11 weeks’ time, but we do not know exactly what they will include as the Government is still consulting.
“However, we do have a draft of the Regulations, called The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which include criminality tests for estate agents.”
Beaumont said he is not expecting the requirement to change.
The new Regulations, which apply to sales agents only, and not – as had been expected – to letting agents, come in on June 26. From that date, agents must start applying for approval, including criminal record checks, with everything to be in place by June 26 next year.
The EU directive that triggered the introduction of these Regulations requires necessary measures to be taken to prevent individuals who have been convicted of relevant offences from holding a management function in an estate agency or being a ‘beneficial owner’ of an agency.
Relevant offences are outlined in the schedule to the Regulations and are those that impact on the risk of money laundering or terrorist financing, or those that have a bearing on whether a person is suitable to hold a management function in an estate agency.
However, Beaumont said: “The list includes very serious offences, as you would expect, but it includes offences involving deception or dishonesty and offences relating to State benefits.
“It even lists some offences under the Estate Agents Act.
“It means that estate agency businesses will need to take reasonable care to ensure that the beneficial owners of the business, such as shareholders or partners plus directors and managers, have passed the criminality test and been approved by HMRC.”
Beaumont said: “I think agents will be shocked to find out about this obligation, if only because it adds yet another layer of red tape on to a profession that seems to continually to be in the spotlight.
“For me the question is not whether this change is appropriate: the question is why, yet again, is it agents that are being targeted?
“If this test is appropriate for agents, why is it not appropriate for businesses in other sectors?
“What really surprises me is that none of the trade bodies have made any comment on it, or lobbied about the targeting of agents, objected to it, or even warned agents about its impending introduction.”
Beaumont also warned that the obligation to obtain approval rests with the individual, not the estate agency business.
He said: “This means there will not be one application per business – there will be numerous.
“It is ridiculous to think that HMRC will process applications and issue approvals without charging a fee, but we do not know at this point.
“The checks are all about criminal convictions and so I suspect Disclosure and Barring Service checks (previously called CRB checks) will be involved, which will have a cost, regardless of any HMRC fees.”
Beaumont went on: “HMRC are currently working on guidance, but as the Regulations are in the consultation period until tomorrow, they are unable to provide any clarification.
“HMRC can even get court orders to force individuals to sell their interest in an agency if they are prosecuted for a relevant offence, and anyone acting in breach of a prohibition risks a £5,000 fine and two years in prison.”
Agency businesses will be able to operate until June 28, 2018, with people in place who do not have approval, provided those people have placed their applications for approval to HMRC before that date.
EYE’s free compliance helpline is available exclusively to subscribers on 0161 727 0798.
“What really surprises me is that none of the trade bodies have made any comment on it, or lobbied about the targeting of agents, objected to it, or even warned agents about its impending introduction.”
Doesn’t surprise me, does it surprise anyone else?
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I trully wonder what the trade bodies do.. They are in business because of us, without agents they would be stuck. I never attend the general meetings nor do I pay attention to the countless jobs emails that gets sent out.
I read the whole idea about PropertyMark, is nothing more than a way to increase the memebership with something to show for it. A nice new logo.. Its funny, that not many tenants or Landlords know about ARLA at all, or what they are about, in truth you would not know of ARLA unless you walk into an Estate Agents.
Im sure there will be an email out from ARLA very soon about this..
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I do have to question why you are criticising ARLA over this.
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Like I said last week, has everyone paid their respective membership fees to the utterly useless naea, nfopp and tpo, please tell me someone is at these offices if only to turn the lights out!!
An utter waste of our forced to pay membership fees..
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No one is forced to stay with them. We left about 5 years ago – when their highly inflated CMP invoice hit my desk and their convoluted licensing programmes. I have to say it has made not one iota of difference to us, except of course to save fees. We have found SAFE much more suitable. As a member back in the late 80s I can remember them being of benefit to agents most of which have been withdrawn over the years. They have lost their way as to the original purpose of setting up a trade association for the benefit of its members and they have their sights set firmly on mandatory licensing and the fee income from that.
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They also have some members that would happily destroy other members small businesses to increase their own listing numbers.
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What next ??? pass a test to show we know right from wrong ? At our own cost of course. Absolutely unbelievable. Big Brother is here finally. Do we know whether HMRC employees have all passed CRB checks? I think we should be told.
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The simple answer is yes, to work for any public authority like HMRC, you will be CRB (sorry about old school terminology) checked on application, that is not to say you won’t be given the job but a check will be made never the less – I suspect the crb check done by hmrc for agents will not be enhanced like it would be for those applying for jobs to work with the vulnerable or young children but I don’t know, it could be, to prevent acts or funding of terrorism?
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In 2014, under the Freedom of Information Act this very question was asked regarding MP’s. The result was ironic.
https://www.parliament.uk/site-information/foi/foi-and-eir/commons-foi-disclosures/members-of-the-house-of-commons-and-members-staff/criminal-convictions/
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Just loving the background colour of the response from the House of Commons at this link. ‘Whitewash’ I think it’s called.
Common colour in the corridors of all Government departments. . . . . . .
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Under the Representation of the People Act 1981, you are disqualified from becoming a member of the House of Commons if you have been found guilty of an offence and sentenced to more than one year in prison, and are currently detained as a result of that offence.
Once you are released from prison, you are not prevented from standing for election as an MP.
This statement may raise an eyebrow or two:
Technically, you are also able to stand for election while you are in prison, so long as the sentence is one year or less.
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That explains the new renewal process from HMRC for the annual AMLR registration, instead of just getting an invoice you now have to register online.
Looking at the volume of information required it could be they’ll be doing the CRB checks or whatever it’s called now (but no doubt charging us for the pleasure) because there’s a lot of personal detail needed for each director such as your unique tax reference number, NI number and passport number. You’ll also need to detail your training!!!
If I’m right on this it is one application per business unlike what David Beaumont says,
They reckon the process takes 30 minutes. Their clock must have stopped. What’s laughable though is that there was 1 April deadline but from mid March until last week their website was down 1 April !
In fairness to the NAEA, I spoke to them on this when the renewal/registration email came in and they knew nothing about it so HMRC doesn’t seem to have had any consultation with the industry bodies (I’m sure if the RICS had been we’d have heard about it although on reflection it may have been written in quill pen and still awaiting their office seal on the envelope before it’s posted back to HMRC!).
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I am afraid that Regulation 26 approval is a personal obligation not a business obligation. There is nothing to stop the business applying on behalf of its manager/shareholders/directors, but it will be one application per person not per business!
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Anything else we need to do? Jump through hoops? Sword swallowing, fire eating? Stand on one leg?
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I think it’s a good idea to have all staff and agency owners checked for a criminal record and sex offenders too. After all agents work with the general public and in their own homes.
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I could perhaps agree with your comment, except for the fact that there are dozens of bubiness people that go into consumers homes, plumbers, electricians, builders ……… No obligation for these guys!!!!
Call me cynical, but the truth is there is less political mileage in targeting plumbers and trying to get them to comply would be an impossible task.
Agents on the other hand are on so many registration lists ICO, TPOS, HMRC it’s a far easier task.
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fair point, fortunately most trades rely on word of mouth, whereas you only sell a property every few years at best. Obviously lettings is a higher turnover but I still think the more effort we make now to be seen as a well disciplined and regulated industry then the less likely cowboys like PB can carve out any part for themselves. And dont forget PB rely on poor agency service to persuade vendors to try them instead.
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