Is a passport enough for AML? Blog 3

29 August 2018 7474 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 our first 2 blogs Ben Robinson, Director of Agency Services at Landmark, considers how electronic checks can help speed up your listing process and improve your customer experience and looked at how they can help when it comes to dealing with foreign nationals.

• https://etsos.co.uk/is-a-passport-enough-for-aml-blog-1/

• https://etsos.co.uk/is-a-passport-enough-for-aml-blog-2/

In blog 3 he considers some of the other tools in the estate agent’s armoury to help demonstrate KYC and ensure compliance with the Money Laundering Regulations.

CLICK HERE to receive all 3 blogs directly

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As outlined by HMRC, agents are required to confirm that a vendor is the legal owner of the property, or have been legally instructed on the owner’s behalf.

For ownership confirmation it is advisable to review the information held on the title by Land Registry. The OC1 Title is split into 3 parts,

• Section A: A description of the property, including details of rights of access or restrictions

• Section B: Who owns the property, including correspondence details

• Section C: Charges against the property, including mortgages, covenants etc

An investigation of part B of the OC1 will confirm the owners, and further investigation of parts A and C could help to inform the nature of the sale.

CLICK HERE TO VIEW OUR GUIDE TO THE OC1 TITLE

Where the vendor is not the legal owner, you will need documentary evidence they are entitled to sell the property. This could be a lasting power of attorney, evidence of the executor(s) of the will in probate cases etc.

Land Registry is also a reliable resource for boundary confirmation. Although not specifically outlined by HMRC, should there be cause to query or dispute the boundaries, it is possible to obtain a title plan.

Where you need to establish beneficial ownership, for example if a property is being sold or purchased through a company, you will need to find out who has 25% or more interest in the business. If the business has subsidiaries you may need to do some digging to understand the shareholder statuses.

Much of this information is now available on Companies House (beta.companieshouse.gov.uk) by searching under “People” and “Persons with significant control” also known as the PSC register where beneficial owners are identified.

However, some of this data is still incomplete and where subsidiaries hold over 25% of the shares, more investigation is needed. Electronic checks take less than a couple of minutes to process and clearly outline the shareholder status of all owners, enabling staff to ascertain beneficial ownership information quickly and accurately.

In short, electronic checks save time spent trying to find (reliable!) sources to verify individuals, beneficial owners, property ownership and boundaries etc to demonstrate Know Your Customer (KYC) and comply with regulation.

Most importantly they help you to undertake and critically evidence compliance; they save time for your business, and they save time for your customers; they streamline your customer’s experience of your services.

Yes there is a cost associated with them, but what is the sunken cost to your business of staff spending time chasing answers to this information and storing it? What is the cost of an electronic check compared to the potential listing you could win by re-deploying staff time to more proactive business activities?

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

(* Source: Anti Money Laundering Supervision: Estate Agency Businesses)