Is a passport enough for AML? (Part 1)
25 June 2018 325 Views
The Money Laundering Regulations 2017 require estate agents to risk assess their business relationships and apply an appropriate level of investigation to ensure that they understand who their customer is, and why they are involved in the transaction.
This investigation is known as Know Your Customer (KYC) and you may have come across it if you have recently had dealings with your bank, or have looked at moving with an IFA/mortgage broker. According to HMRC, for estate agents KYC involves several avenues of enquiry:
· identifying all sellers and all buyers and verifying their identity
· identifying all beneficial owners, where applicable, and taking reasonable measures to verify their identity to satisfy yourself that you know who they are
· obtaining information on the purpose and intended nature of the business relationship although in most cases this will be self-evident for estate agency businesses
· conducting ongoing monitoring of the business relationship, to ensure transactions are consistent with what the business knows about the seller and buyer, and the risk profile
· retaining records of these checks and update them when there are changes. (4.9)
The ultimate objective is to prevent the use of illegally obtained funds or terrorist funding from being legitimised through the sale and purchase of property.
In a series of short blogs, Director of Agency Services at Landmark, Ben Robinson, will consider how electronic checks can help agents undertake and demonstrate their compliance with Know Your Customer.
Customer Due Diligence
Typically a low or normal risk customer is somebody the agent has met and in the course of discussions the reason for the sale or purchase is apparent and presents no obvious risk from a Money Laundering point of view.
Where your policies, procedures and assessments identify such, an electronic check serves to satisfy the requirement to
· obtain a private individual’s full name, date of birth and residential address as a minimum (4.36)
Additionally, when this is combined with meeting the individual the following may apply:
· If a member of staff has visited an individual at their home address, a record of the visit may assist in corroborating the individual’s residential address (for the purposes of a second document). This should be covered in the risk assessment. (4.42)
The critical element is to document and evidence both the process (in your money laundering policies and procedures) and the actual undertakings. All AML checks must be retained for 5 years after the end of the business relationship.
Enhanced Due Diligence
If your policies, procedures and assessments identify a higher risk, then enhanced due diligence is appropriate.
· You must do more to verify identity and scrutinise the background and nature of the transactions than for standard customer due diligence. How this goes beyond standard due diligence must be made clear in your risk assessment and procedures. (4.20)
Electronic checks can be set to either “Normal” risk or “High” risk… with “High” risk checks requiring more electronic evidence. We also advocate the use of the document verification service in cases where Enhanced Due Diligence is identified. You can obtain either the original, or copy of the driving license or passport and verify its legitimacy using electronic checks.
One method is identified as the “Selfie” method. Have our customer take a “selfie” with their ID, thereby confirming the identity of the person in the photograph on the ID is the same as the person taking the selfie. You must then verify that the document provided is legitimate, either by physical inspection, or electronically.
We have compiled a list of indicative red flags that may alert estate agents to the need to apply Enhanced Due Diligence, and/or consider submitting a Suspicious Activity Report if you suspect fraud.
These are not hard and fast rules or indeed evidence of illegal activity, rather a list compiled to help train staff on identifying potential high risk scenarios in order to be able to make a decision on whether to apply enhanced due diligence or not.
Electronic checks serve to speed up your KYC and CDD; checks take around 60 seconds to process. If you can streamline your particulars it means you can be listing the property same day or within 24 hours of being instructed.
How much more positive a customer experience than waiting for copies of ID, visiting the home to collect and/or verify the documents, chasing vendors and purchasers for the information etc.
Compliance in a Box from Landmark is a simple pay-as-you-go toolkit to help agents fulfil their KYC obligations. From one account you can undertake and evidence:
· Verification of buyers and sellers within a minute inc PEPs and those on sanctions lists
· Enhanced due diligence where your risk assessment identifies it is needed
· Confirmation of home owners and boundaries
· Identification of beneficial owners in cases where businesses are involved
· Support with verifying foreign national both in the UK and abroad
For more information about undertaking and evidencing your compliance with the Money Laundering Regulation 2017, please contact Compliance in a Box on 01524 220013
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