“Heavy Handed Banks” slammed for pooled client account crisis

Propertymark has responded to an HM Treasury consultation on anti-money laundering processes - and in doing so it’s slammed “heavy handed banks”.

For several years banks have been withdrawing access to pooled client accounts, sometimes called undesignated client accounts, because they perceive them as a risk to their compliance with Anti-Money Laundering Regulations. 

However, Propertymark insists this is based on a lack of understanding of how the current client money protection and anti-money laundering regulations apply to letting agents. 

And it says this crisis illustrates why professional bodies have a vital role to play in anti-money laundering and counter-terrorist financing. Propertymark has worked closely with HMRC to communicate the impact on property agents, to share legislative updates and sector insights. 

In terms of the broader response to the consultation, Propertymark says it strongly supports the government’s proposed Office for Professional Body Anti-Money Laundering Supervision model of supervision.

Propertymark says that sector-specific guidance coupled with improved cooperation across sectors is the most effective way to reduce fraudulent activity whilst ensuring firms take proportionate measures - and avoid damaging side effects like the pooled client account problem.

The trade body says it’s long argued for the consolidation of supervision, whilst promoting the role of professional bodies as supervisors because they understand the sectors they work in and can gather information about developing risks. 

And it says that the Office for Professional Body Anti-Money Laundering Supervision could play a greater role in facilitating and reporting on the exchange of information between supervisors within and across different sectors. 

Under the proposals, the powers of the Office for Professional Body Anti Money Laundering Supervision would be strengthened, with the ambition of driving further improvements in the effectiveness of PBS supervision. 

The 22 Professional Body Supervisors would continue to supervise legal and accountancy sector firms for Anti Money Laundering/Counter Terrorism Financing purposes. There would be no change to the remit of the existing statutory supervisors including HMRC. 

On the back of this, the industry body is calling to see sector-specific guidance for property agents to ensure Anti Money Laundering activities are as valuable as possible in preventing criminal activity. In particular, a simplified route for property agents when making a Suspicious Activity Report would be a huge benefit in supporting agents to make high-quality reports that were of optimum use to investigators and police.  

The industry body also continues to call for important datasets such as Politically Exposed Persons and the Register of Overseas Entities to be easily accessible and with live updates, and for a change in regulations to allow agents to legally rely on verification of beneficial owners on the Register of Overseas Entities as part of their Customer Due Diligence. 

Henry Griffith, policy officer at Propertymark, comments: "Propertymark acknowledges that there are some key areas for improvement for the current AML Supervisory Regime. However, many of the proposals suggested could risk the regime losing much of its prior experience and the sector-specific expertise which has worked very well in the past.  

“The shortcomings of the existing system relate to a lack of coordination between sectors, which has played a part in current issues surrounding the closure of undesignated client accounts. We hope that a stronger OPBAS will be able to enforce more effective cross-sector coordination, ensuring that one sector's response to AML does not impact another sector."