What are AML checks?
An AML check is one of the client due diligence measures mandated by AML rules for regulated companies to prevent crime and estate agent money laundering. AML checks are used to identify customers and analyze associated risks. They can range from KYC checks to real-time screening. AML checks are important to the best practices of perpetual KYC. Perpetual KYC is a proactive approach to AML compliance by continuously monitoring customer behavior with artificial intelligence (AI).
Anti-money laundering for estate agents is a precaution that assists businesses in not becoming direct or indirect victims of fraud. Companies that fail to comply with these restrictions may risk large penalties and other serious consequences.
AML Red flags
Many red flags require an AML check for estate agents. The following red flags should be closely monitored to combat anti-money laundering for estate agents
- Only cash buyers
- Buyers from abroad
- The discrepancy between the property’s valuation and the buyer’s official income for money laundering checks when buying a house
- Those with a high turner of buying and selling properties
- When a PEP is involved in the transaction.
- False or incomplete documentation
- Those who are unable to give or have not provided the requested information on time
- Where it is challenging to discover the Beneficial Owner of a property.
What AML Checks Do Estate Agents Do?
When comparing the financial years 2020/21 and 2021/22, the National Crime Agency reported a 21% increase in the number of Suspicious Activity Reports (SARs) filed and processed, as well as a 120.6% increase in the amount of money withheld to criminal suspects. According to the 2017 Money Laundering Regulations, anti-money laundering for estate agents must request proof of identity and proof of address from clients. Let’s perform a short anti-money laundering review of the money laundering checks when selling a property UK and money laundering checks when buying a house.
Proof of ownership
Proof of ownership is necessary to proceed if the client is selling their property. This can be done by looking over the title deeds for the property on the Land Registry. You should compare the names of the current owners listed in the title record with those shown on their identification cards and most recent utility bills.
Proof of funds
Customers who wish to purchase a home must demonstrate the legitimacy of the funds used to do so. AML checks for estate agents will require evidence of the source of the funds, such as monthly paychecks from an employer, and will confirm this with bank statements. To comply with AML checks for estate agents UK Money Laundering Regulations. an agent must be able to present proof of the funds
Proof of identity
Do estate agents need proof of identity?
The proper efforts should have been taken to confirm the identification of their clients BY estate agents. A current utility bill and an official ID, such as a passport or driver’s license, are required to verify the person’s address and name, respectively. Copies need to be registered and stored for five years on a file
AML Regulations for Estate Agents
Estate agents must register with their supervisory authority, which is currently HMRC, under the MLR 2017. Otherwise, they risk being penalized and suffering the ramifications of negative publicity. Some of the regulations are
- Per Regulation 4 when the buyer’s offer is accepted by the seller, estate agents are deemed to have entered into a commercial relationship with the buyer and seller under the MLR 2017. This could, for example, entail sharing customer due diligence information
- The identification and assessment of risk was a key component of the Money Laundering Regulation 2007. Regulation 18 outlines the risk variables that estate agents must consider when assessing risk, such as their clients, the countries and geographic locations in which they operate, their products or services, transactions, and delivery channels.
- The MLR 2017 applies to estate agents and their companies, including subsidiaries based outside the UK, under Regulation 20. Subsidiaries and branches operating in the European Union must adhere to national legislation enforcing the Fourth Money Laundering Directive.
- Regulation 21 requires estate agents to nominate someone to be in charge of ensuring compliance with the 2017 MLR. This person should serve on the board of directors or as a member of senior management as appropriate such as Money Laundering Reporting Officer (MLRO).
- According to 21b. the AML regulations for estate agents are required to assess the skills, trust, and behavior of employees involved in the identification, prevention, or detection of real estate money laundering and terrorist financing.
- Regulation 24 compels estate agencies to teach relevant workers about money laundering for estate agents and terrorist financing legislation, as well as data protection standards, regularly.
- According to regulations 27 and 28, Customer Due Diligence (CDD) is the main provision of the MLR 2017 and specifies the risk-based strategy employed in the fight against money laundering and terrorist financing. Real estate brokers must identify and authenticate the identity of the person seeking to act on behalf of the client, as well as demonstrate that they are authorized to act, for example, a person functioning as a broker in the name of the buyer for money laundering checks when buying a house.
- Regulation 33 of MLR 2017 specifies the situations in which EDD must be used, i.e. any situation recognized as high risk such as Politically Exposed Persons (PEP) as per Regulation 35.
- According to Regulation No. 39 any real estate agent who relies on a third party to conduct a CDD must engage in a written agreement with the third party under the MLR 2017. Third parties must give a copy of the CDD document upon request.
The MLR 2017 makes prejudicing investigations a crime. Anyone who carelessly makes a false or misleading statement in connection with a financial investigation of a criminal offense faces a two-year prison sentence.
AML Regulations for Estate Agents in the US.
AML regulations were implemented in the United States in the 1970s through the Bank Secrecy Act (BSA), which laid the groundwork for AML legislation. The Financial Crimes Enforcement Network (FinCEN) administers and supports the BSA.
“Persons involved in real estate closings and repairs” were added to the scope of financial institutions in 1988, but they are excluded from the AML framework’s obligations. Many real estate professionals, such as lawyers, brokers, agents, inspectors, and trustees are exempt from AML requirements, such as maintaining a customer identification program (CIP) and filing suspicious activity reports (SARs) and currency transaction reports (CTRs)
AML regulations for real estate include AML standards for financial institutions,
- Form 8300,
- Cash and Financial Reporting (CMIR),
- Geographic targeting order (GTO),
- Benefits rules and availability
On February 1, 2024, the new beneficial ownership rule will go into effect, requiring businesses and real estate buyers to register with FinCEN and give information identifying the beneficial owners.
The National Association of Realtors (NAR) and FinCEN collaborated to create the Voluntary Guidelines for Realtors, which serve to regulate and educate dishonest realtors. In the event of suspicious activities, file a SAR.
AML Regulations for Estate Agents in the UK
In the UK, HM Revenue and Customs (HMRC) is in charge of handling tax administration and enforcing anti-money laundering for estate agents. AML checks for estate agents UK are being reminded by HMRC to comply since failure to do so could result in legal action. When establishing the penalty, HMRC will take into account a variety of variables, including the cause of the non-compliance, a history of non-compliance, the severity of the violation, profitability, business size, and undue interference with cash flow.
National Crime Bureau Committee must receive reports of alleged financial transactions from real estate agents in the UK. The primary terrorist funding laws and anti-money laundering for real estate in the UK are
- The Proceeds of Crime Act 2002,
- The Terrorism Act 2000,
- The Money Laundering Regulations 2017,
- The Criminal Finance Act 2017, and various other counterterrorism and security practices
AML Regulations for Estate Agents in Europe
The Fifth Money Laundering Directive approved in April 2018 European Parliament, made adjustments to the services On January 10, 2020, in the UK provided by agents, and real estate agents, to combat real estate money laundering and terrorist funding. Money laundering checks when selling a house UK are important for anti-money laundering for estate agents.
To comply with regulatory standards, real estate agents must proactively apply these procedures, which are intended to protect real estate transactions from criminal behavior.
Why are AML Checks Relevant for Estate Agents?
Real estate money laundering is a common problem. To conceal their true motives, criminals frequently employ sophisticated business processes and money in financial institutions to legitimize massive sums of money. Money laundering activities are also aided by tax fraud committed by estate agents. This is why it’s crucial to do AMLcheck for estate agents UK and to have a risk-based strategy to make sure due diligence is carried out and proven. AML regulations must be followed for legal reasons, but there are also other advantages.
- Customers attempting to pay with cryptocurrency are monitored and regulated.
- Strict regulations for prepaid cards and online payments.
- Expansion of checks by regulated companies to incorporate other companies they do business with.
- In the UK, tighter regulations and penalties have been put in place to combat money laundering. Businesses that do not follow the most recent legislation may be subject to fines of up to 5 million euros, which is 10% of their annual revenue.
Here are some of the most effective methods to lessen the likelihood that your business will be implicated in estate agent money laundering:
- KYC check that can demonstrate that your company hasn’t been involved in the movement of illicit payments. In general, procedures give estate agents access to the client information they require. The directives of the European Union Directives (EU) and the Financial Action Task Force (FATF) also influence the significance of KYC.
- When in doubt, notify the National Crime Agency of any suspected SAR activity.
- Make sure you carry out enhanced due diligence and maintain track of the buyer’s or seller’s identification as well as the legitimacy of the funds.
- Enhanced due diligence is required if the buyer or seller is known to be PEP or if people from high-risk countries who have been placed on the blacklist are involved in the transaction.
- Hire MLRO and teach your staff about the most recent anti-money laundering requirements, internal procedures, warning indicators, etc.
- Maintain timely and accurate records.
AML Check Cost
The AML check cost is the one thing that worries AML check for estate agents. Although costs might vary based on several variables, including the complexity of the check and the implementation of AML, it is crucial to consider these expenses as an investment in maintaining a trustworthy and clean real estate market.
So while the initial AML checks are typically covered by estate agents, it’s also acceptable for the client to pay for others along the conveyancing process. Businesses must register with HMRC for AML monitoring, which costs £300 per business and necessitates supervision, per the law since 2018.
Businesses must also pay ongoing annual renewal costs after paying the initial registration charge. In recent years, this renewal charge has climbed significantly. The cost was £110 per premises per year in 2015. This was raised to £115 in 2017 and then to £130 in December of that same year. The AML check cost, however, experienced its most recent and significant hike in 2019, when it increased to £300 per premises per year. As a result, estate agents now spend £5.98 million annually for AML monitoring.
In the real estate sector, adhering to AML regulations is not only required by law but also by ethics. We can help to a trustworthy and clean real estate market while preventing crime and money laundering by offering thorough AML checks for estate agents. Realtors, keep in mind that AML checks are your defense against financial crime, not just a requirement under the law. With the help of the KYC AML guide, estate agents can adhere to the AML compliance program and avoid legal repercussions.