The HMRC Anti-Money Laundering (AML) Supervision regulations set out what Estate Agency and Letting Agency businesses must do to prevent their services from being used for money laundering, terrorist financing or proliferation financing purposes. Failure to comply with the AML regulations can lead to significant penalties. HMRC has the authority to impose fines and other sanctions, including criminal prosecution, for businesses that do not meet their AML obligations.
This article focuses on two key components of these regulations: Risk Assessment and Client Due Diligence (CDD).
Risk Assessment
Under the AML regulations, estate and letting agents are required to conduct thorough risk assessments to identify and mitigate potential risks related to money laundering and terrorist financing. Businesses must document their risk assessments and ensure these are updated regularly. A written record of risk factors and the rationale behind assessments is required as part of AML compliance, including who the clients are, how they interact with the business and measures taken to mitigate risks.
What is Risk Assessment?
Risk assessment involves understanding the nature and level of risk your business might face concerning money laundering and terrorism financing activities. It requires a systematic evaluation of the factors that may expose your business to these risks.
Agents must identify:
- The types of clients they deal with (e.g., high-net-worth individuals, politically exposed persons (PEPs), or businesses from high-risk jurisdictions)
- The geographical areas in which they operate or where their clients are located
- The type and size of transactions they facilitate, with a focus on high-value properties that may be attractive for money laundering
Risk-Based Approach
HMRC emphasises a risk-based approach ie the extent of due diligence and risk mitigation measures should correspond to the level of risk involved. Businesses are required to:
- Conduct enhanced due diligence (EDD) where risks are higher, eg transactions involving PEPs
- Implement simplified due diligence (SDD) when risks are lower, such as transactions involving well-known clients with a clear source of funds
How Can Amiqus Help
- Amiqus offers built-in risk-assessment modules and partners with regulatory bodies to make their risk-assessment templates available within the platform to help you evaluate and document risks effectively
- Amiqus’ custom forms with smart logic allow you to tailor the risk assessment process to meet your firm’s specific needs
- Everything is managed within one platform, where you can seamlessly integrate risk assessments with CDD information while maintaining a complete, date and time-stamped audit trail for future audits and inspections
To find out more about best practices, tools and templates for effective risk assessment, download our client & matter risk assessment guide.
Client Due Diligence
Client Due Diligence is another important aspect of the AML regulations. It involves verifying the identity of clients and assessing the purpose and intended nature of the business relationship. HMRC regulations require that CDD be applied
- At the start of a new business relationship
- When there are doubts about the veracity of the client information previously obtained
- On an ongoing basis, where there are indications that the risk profile of a client has changed
What is Client Due Diligence
Client due diligence refers to the steps an estate or letting agent must take to confirm the identity of their clients, understand the nature of the transactions they are involved in, and establish that the source of funds being used is legitimate.
Key components of CDD include:
- Identifying and verifying the identity of the client (whether an individual or a company)
- Understanding the client’s financial background and the source of funds involved in the transaction
- Determining whether the client poses any additional risks, such as being a PEP or from a high-risk jurisdiction
Client Identification Requirements
The following documents are typically required to verify a client’s identity:
- For individuals: passport, driving license, or other government-issued ID
- For corporate entities: proof of incorporation, company ownership structure, and information about directors
In higher-risk cases, enhanced due diligence measures, such as obtaining additional documentation or verifying the identity of ultimate beneficial owners are mandatory.
Enhanced Due Diligence
Enhanced due diligence (EDD) is carried out when dealing with high-risk clients or transactions. EDD may include obtaining more detailed information about the client’s business activities, wealth, and source of funds, as well as monitoring transactions more closely throughout the relationship. HMRC mandates that estate and letting agents apply more rigorous checks in certain circumstances, such as when:
- The client is a PEP or related to a PEP.
- The transaction involves a high-risk country known for weak AML measures
How Can Amiqus Help
Amiqus streamlines your CDD process by automating the collection and verification of client information. This includes the full suite of AML and KYC checks including those needed for enhanced due diligence.
Amiqus allows you to:
- Digitally verify passports and driving licences for 195+ countries and validate that the person completing the check matches the person in the document
- Verify the client’s name and address by cross-checking multiple government databases and independent data sources
- Check if your client is politically exposed, appears on sanctions lists or is linked to crime by the media, with options for daily monitoring and alerts
- Identify beneficial owners by checking company directors, owners and people with significant control (PSC)
- Verify the client’s source of funds and wealth through FCA-regulated open banking technology
Want to find out more about how Amiqus can help you overcome your pain points related to compliance and client due diligence? Download our brief document.
Conclusion
The HMRC’s AML regulations require real estate businesses to implement robust risk assessments and client due diligence along with record-keeping, reporting, staff training and other processes to mitigate the risk of being used as conduits for money laundering.
While the checks and processes for risk assessments and client due diligence have traditionally been carried out manually, these methods can often fall short in mitigating risk and saving time. However, the right digital solution can address these challenges, allowing businesses to streamline their compliance processes and stay ahead of regulatory demands.
Amiqus is more than just an anti-money laundering reporting tool – it’s a comprehensive end-to-end onboarding and compliance platform designed to provide a seamless experience for your clients while saving you time and money.
To find out how Amiqus can support your estate agency or letting agency business, schedule an informal chat with our team today or watch a short personalised demo.
