Earlier this year, there were shock waves through the industry when three estate agents were fined enormous sums of money under anti-money laundering legislation.

There was no suggestion that any money laundering had actually taken place or that any of the agents had been complicit in any crime – or even that the agents were not correctly registered.

The fines totalling £246,665 were because the agents were alleged to have failed in their admin procedures.

Now, however, Eye is asking if the money laundering regime for agents is about to be tightened up, to include mandatory checks on purchasers as well as sellers.

An article in a national newspaper has called for an investigation into estate agents and money laundering.

The Independent article claims that estate agents are “seen as crucial gatekeepers to washing foreign billionaires’ ill-gotten cash”.

It goes on: “Dirty money is widely seen as being a key reason central London property prices have increased so dramatically.

“Estate agents, like bankers and lawyers, are supposed to file suspicious activity reports to the police when they think laundered money may be being used by customers, but they are only legally obliged to carry out checks on sellers, not buyers.”

The timing of the article is interesting.

In May, a national risk assessment of money laundering and terrorist financing was submitted to the Treasury and Home Office by an organisation called Transparency International UK.

The report specifically said that one problem with Britain’s anti-money laundering regime was “limitations of estate agents’ money laundering requirements”.

The report was critical that under Money Laundering Regulations in the UK, estate agents are legally required to undertake due diligence on sellers, but not purchasers.

The report added: “This clearly stymies the effectiveness of AML [anti-money laundering] in the property sector.”

The report, which also identified estate agents as being among the “gatekeeper sectors”, said that the volume of suspicious money laundering activity reporting was very low.

It called for loopholes to be closed – in particular for estate agents to have to check out, and report suspicions, on “non-client buyers” and not just sellers.

It said that in 2012/13, estate agents contributed only 0.07% of all suspicions, equating to 215 reports.

Estate agents do, of course, have to register with HMRC under Money Laundering Regulations. See link at end.

Given that it usually takes several months for a government body to absorb a report’s recommendations, and given that HMRC has taken over the duty from the OFT, could agents’ duties now be widened?

The key question is: do the authorities know that estate agents do not handle money?

Solicitors do, lenders do, banks do. Estate agents don’t. That is not to say that they shouldn’t play their part in Britain’s anti-money laundering regime. We just thought we ought to point it out.

And it could be a reason why reporting levels have been so low.

Buyers don’t routinely stumble through an estate agent’s door with, say, £1m in readies for the agent to count out and hand over to the buyer, minus commission, whereupon the parties concerned disappear into the sunset.

By contrast, of course, letting agents do handle money – and do so the whole time. Rent money, deposit money and fees.

Curiously, this never seems to be mentioned anywhere.

The first two links are how we reported the fines on three agents this spring.

https://www.propertyindustryeye.com/three-estate-agents-fined-heavily-over-money-laundering/

https://www.propertyindustryeye.com/agent-hit-massive-anti-money-laundering-fine-speaks-shock/

HMRC guidance is here

The Independent article is here