Developers selling homes do not have to register for AML but estate agents do – taxman clarifies

An extraordinary anomaly has emerged by which developers selling homes on their own sites do not have to be registered for anti-money laundering purposes – but any estate agent selling those very same homes must be.

Developers who set up their own staffed sales offices on sites do not have to worry about money laundering and have no responsibilities for checking out dodgy transactions. They are regarded as peer to peer, or private, sellers.

However, if they use agents either to staff their sales offices or handle sales, then money laundering regulations do apply.

The issue has emerged after a buying agent told EYE that he had agreed a purchase on a new development on behalf of a client.

When he asked if the developer needed to check out both the purchaser and himself for AML purposes, he was told no.

The agent told us: “As a buying agent who neither sells nor lets nor handles any client’s monies, I am classed by HMRC as an estate agent for money laundering purposes.

“If I am regarded as someone who might ‘money launder’ my clients, why should a residential property builder not be?

“Surely the residential property builder with a sales team is acting as an estate agent and selling properties?”

EYE put this to HMRC, which supervises estate agents for money laundering purposes.

A spokesperson told us: “If an individual or company sells property they own to an individual that they find themselves, this is a private sale and does not involve an estate agency.

“If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.”

In the early days of anti-money laundering supervision, estate agents were told to do due  diligence on their customer – which many took to mean only the seller who paid them. It may be that developers were exempted because if they sold their own homes, they would have been doing customer due diligence on themselves.

However a new EU directive in June 2017, treats agents as entering into a business relationship with both sellers and buyers, and requires agents to scrutinise buyers’ finances.

The regime includes, for example, auctioneers who are required to check out all potential purchasers before giving them a paddle so that they can bid for a property – however, developers seem to have been omitted if they use their own sales teams.

The full response EYE received from HMRC was this:

  • The Money Laundering Regulations are about supervising certain specific businesses conducting relevant activity. This includes estate agencies.
  • The definitions of estate agency businesses and what is relevant activity are defined in the Estate Agents Act 1979. This legislation is owned by NTSELAT (the National Trading Standards Estate and Letting Agency Team). Owners of property and peer to peer sales of said property are not covered in this definition.
  • If an individual or company sells property they own to an individual they find themselves, this is a private sale and does not involve an estate agency. If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.

More top news stories

‘We’re here to sell houses, not to list them’, Purplebricks boss insists

Continue Reading ...
x

Email the story to a friend

10 Comments

  1. mmmm

    To my mind, AML checks are about government asking responsible businesses to try to suss out if buyers are disposing of ill gotten gains.

    Assuming I’m not completely wrong, why wouldn’t that apply to builders selling their wares?

    to treat builders (particularly big ones) as private sellers is nuts.

    Report
  2. urbanite

    I wonder how many politicians sit on the boards of large developers?

    Report
  3. Paulfromromsey87

    Want to launder some money? Buy a new house.  Simples!

    Report
  4. ArthurHouse02

    AML is not about catching criminals, its about rinsing estate agents. As large new build developers are contributors to political parties why put up barriers effecting their profits.

    Report
    1. mmmm

      I believe any business selling high value items is subject to similar requirements. Was in motor trade back in 90s and we had to inform someone (can’t remember who but maybe HMRC) if people were paying more than 10k in cash

      Report
      1. Mark Walker 2

        Pretty sure that bookies have to KYC anyone gambling a similar amount.  House builders selling hundreds of thousands of pounds of assets without doing the same checks is… interesting…

        Report
  5. Certus

    Completely agree with ArthurHouse02.

    If HMRC considers Builders ‘private sellers’ then surely Rightmove and other websites should not accept adverts from them, isn’t that part of their current terms of business – NO PRIVATE SELLERS?

    Report
  6. drasperger

    Was it just an urban myth that “the bandits” from Northern Ireland laundered millions (profits from Skunk production) through new build flats in Northern Cities in the Late Eighties and early Nineties?

    Report
  7. MTOM1

    Most of the credible developers engage with Agents and also do their own checks.Those that don’t tend to be,shall we say,the less regulated ones-like the developers who build flats the size of a London cab !

    Report
  8. Property Poke In The Eye

    The system is broken.

    Report
X

You must be logged in to report this comment!

Leave a reply

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.