A typical estate agency branch could require a full-time compliance officer, costing around £45,000 a year, to meet new anti-money laundering (AML) obligations.

This is according to compliance specialist Coadjutor, following its analysis of the latest HMRC guidance.

The prospect of a dedicated staff member is because using the time of higher-paid negotiators would result in even greater expert – Coadjutor calculates this could be as high as £185,000 a year in lost sales for an average branch.

The root cause is the change to the Money Laundering Regulations which came into force on on June 30 this year, and HMRC’s updated Anti-money laundering guidance for supervised businesses, published in July.

The guidance makes clear that businesses must take a risk-based approach to protecting themselves from money laundering, terrorist financing and proliferation financing. 

Estate agents must maintain a written risk assessment specific to their business and put in place appropriate policies, controls and procedures (PCPs) to manage and mitigate the risks identified.

In practical terms this means maintaining and reviewing business-wide risk assessments, policies, controls and procedures (PCPs); conducting customer and transaction risk assessments; carrying out customer due diligence; assessing source of funds where appropriate; collecting missing customer information; documenting decisions and maintaining records; training staff; ongoing monitoring; identifying and escalating suspicious activity; supplier oversight; and keeping processes up to date as regulation changes.

Taken together, Coadjute’s analysis indicates these activities could require at least one full-time compliance professional for an average estate agency branch, at an estimated annual employment cost of approximately £45,000.

The consequences of getting compliance wrong are significant, so are expected to focus agents’ attention. 

HMRC’s new guidance makes clear that contravening a relevant requirement of the Money Laundering Regulations is now a criminal offence and may result in criminal investigation. 

On conviction, offences can carry an unlimited fine and/or imprisonment of up to two years.

Importantly, an agency does not fulfil its responsibilities simply by trying to identify individual money launderers. 

Businesses must establish appropriate risk assessments and PCPs and ensure they are effectively implemented and complied with throughout the organisation.

Separately, failing to make a required disclosure where money laundering is suspected is itself a criminal offence. 

HMRC states that individuals may be referred to the Crown Prosecution Service, with prosecution possible even where there is insufficient evidence to prove that money laundering actually took place.

The requirements present a particular challenge for independent and mid-sized estate agencies, where AML responsibility has traditionally been shared between owners, managers and negotiators alongside their principal roles.

Coadjute believes agencies increasingly need to consider not simply which AML technology they use, but who is actually responsible for operating their AML function.

Technology can accelerate individual checks, but it does not remove the requirement to assess risk, investigate exceptions, obtain missing information, document decisions, maintain policies and risk assessments, train staff and ensure procedures are followed.

Dan Salmons, CEO of Coadjute, says: “We’re seeing the end of AML as a side of desk activity.  With the July HMRC guidance and the new criminal risks, AML compliance has moved well beyond being a series of checks that can simply be absorbed into someone’s day job.   

“Agencies really have to understand their risks, have the right policies and procedures in place, and demonstrate that those procedures are actually being followed. The big question for them is who is going to own and operate the compliance function day to day, and how is this increasingly specialist work going to get done?    

“It’s really not something a bit of software can solve.  For other highly regulated activities like accounting, they call on professionals.  It’s time to start treating AML the same way”.

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