The Treasury-approved HMRC AML guidance for Estate Agency and Letting Agency businesses adds colour to the underlying Money Laundering Regulations 2017 and sets out what should be done to prevent their services from being used to launder the proceeds of crime, or finance terrorism. Failure to comply with the Money Laundering Regulations can lead to significant penalties and reputational damage.
HMRC can, and does, impose fines and other disciplinary sanctions, including criminal prosecution, against individuals and businesses that do not meet their AML obligations.
This article focuses on two key components of these regulations: Risk assessment and Client due diligence.
Risk assessment
Under the Money Laundering Regulations, estate and letting agents are required to conduct thorough risk assessments to identify and assess potential business-wide, client and matter-level 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 record-keeping requirements.
What is risk assessment?
Risk assessment involves a holistic understanding and assessing the nature and level of inherent money laundering/terrorist financing risk your business might face due to the profile of your clients, and the nature of the work you undertake for them. This is required at a business, client and matter level and requires a systematic evaluation of the factors that may expose your business to these risks.
The red flags and factors which should be considered in your risk assessments are set out in s. 5 and s. 10 of the guidance
Risk-based approach
HMRC emphasises a risk-based approach i.e. the nature and extent of due diligence and risk mitigation measures should correspond to the level of risk involved, and mitigate the specific risks which have been highlighted in the risk assessment exercise.
For example, businesses must conduct enhanced due diligence (EDD) where risks are higher, e.g. transactions involving PEPs (s. 6.91) but may reduce the level of due diligence undertaken by conducting simplified due diligence (SDD) when risks are lower, such as transactions involving a public authority or a publicly owned body in the UK, or a financial institution itself regulated for money laundering purposes (s. 6.83).
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
Undertaking comprehensive Client Due Diligence (CDD) is another critical aspect of the money laundering regulations.
It involves verifying the identity of clients and assessing the purpose and intended nature of the business relationship. The money laundering regulations and HMRC guidance require that CDD be applied under a variety of circumstances and points of the business relationship (s. 6.14).
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 an individual client
- Where the customer is a legal person, trust, company, foundation or similar legal arrangement you must identify the customer and take reasonable measures to understand the ownership and control structure of that legal person, trust, company, foundation or similar legal arrangement, including verifying the identity of the beneficial owner
- Understanding the client’s financial background and the source of funds involved in the transaction
- Understanding the nature, context and purpose of the business relationship
Please see s.6 of the HMRC guidance for further information regarding specific requirements.
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 and details of incorporation, documents of constitution registered address, company ownership structure, identity documents of beneficial owners and directors
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, and their source of funds or wealth, as well as monitoring transactions more closely throughout the relationship. The regulations require 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 controls
See s. 6.91 of the HMRC Guidance for full details of when EDD is required
How can Amiqus help?
Amiqus supports and streamlines your CDD process by automating the collection and verification of key CDD information.
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
- Help identify beneficial owners by checking company directors, owners and people with significant control (PSC)
- Support understanding of 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 regulated businesses being used to launder the proceeds of crime.
While the checks and processes for risk assessments and client due diligence have traditionally been carried out manually, these methods can often be time-consuming and ineffective in mitigating risk in an increasingly digital world. However, the right digital solution can help 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 platform of integrated tools, templates and compliance checks you can trust – designed to support your compliance requirements and provide a seamless, efficient 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.
