Estate and lettings agents
Our guidance and advice takes into account the varying risk exposure of different industries. You’re not getting generic, copy and paste advice. You’ll get specialist, specific advice that you can implement into actions.
Introduction
What does this mean
for my business?
Estate agents and lettings agents (“agents”) are captured within the scope of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“the MLRs”). The supervisory authority for the purposes of overseeing compliance with the MLRs is HM Revenue & Customs (“HMRC”). If a person or business fails to comply with the Regulations, they may face civil penalties or criminal prosecution. This could result in unlimited fines and/or a prison term of up to two years. You can find information on the penalties HMRC can issue on GOV.UK.
Between April & September 2023 a total of £1.6m in fines were issued to more than 250 agents. In April 2024, HMRC announced intentions to name and shame agents for AML breaches. With the consequences of failing to comply as drastic as they are, it’s time to take a closer look at compliance.
It means agents fall within the scope of MLRs and therefore you have legal obligations to carry out several activities. Here are some examples:
1. Registering with HM Revenue & Customs which can currently be done via their online website here. (https://www.gov.uk/guidance/registration-guide-for-estate-agency-businesses). It’s a criminal offence to trade as an estate and/ or lettings agency business without being registered or after your registration is cancelled with HMRC for money laundering supervision. If you’re unsure whether you need to be registered, ask us. We’ll look at your business model and advise you accordingly.
2. Conducting customer due diligence (“CDD”) and enhanced due diligence (“EDD”) when entering a business relationship with clients. Agents are treated as entering a relationship with the seller or landlord, and additionally if you’re acting in a sale, the purchaser at the time the offer to buy has been made and accepted or the tenant for lettings transactions. CDD is typically a standard process you’ll follow in almost all circumstances for your clients. EDD on the other hand is reserved for higher risk clients and the purpose is to address the inherent risks of financial crime with the client you’re dealing with. The purpose of EDD is to allow you to address risks with your client by ‘enhancing’ the range of information you’re taking from those you enter a business relationship with.
3. Filing suspicious activity reports or reports of a suspected designated person attempting to circumvent sanctions. When you become suspicious of money laundering, sanctions and the financing of terrorism there are separate obligations to file different types of reports.
For money laundering and terrorist financing suspicions you are required to submit one of three types of Suspicious Activity Reports to the National Crime Agency. For sanctions circumvention and breaches it’s the Office of Financial Sanctions Implementation (“OFSI”)
We’re not an estate agency business
The definition of Estate Agency work is very broad and will cover businesses that will not consider themselves to be ‘Estate Agents’ which is why when you read any external guidance issued by HMRC, they will use words such as ‘Estate Agency Businesses’. These may include businesses that are construction companies, social housing providers and asset management companies as these may carry out Estate Agency work. If you have received a letter from HMRC and/ or are unsure whether your business carries out a service that would fall within the scope please talk to us. When we say scope we mean falls within the meaning given by section 1 of the Estate Agents Act 1979. The National Trading Standards Estate and Letting Agency Team confirmed a business qualifies as an Estate Agent under the act if it meets either of the requirements listed in sections 1(1)(a) or 1 (1)(b). It’s important to note it does not have to meet both requirements and one is sufficient to render an agent within scope.
I’m a franchisee
Franchise business models can vary in their operation and in terms of how control is exercised. There are indicators that both the franchisor and franchisee can make decisions that could be viewed as being in control of how their businesses are conducted. HMRC expects that where “franchise agreement provides that a franchisee has substantial independence from the franchisor, for example they can make key decisions that affect its ability to operate as a business and choose how it does business and make a profit even within the confines of a franchise agreement, then a franchisee is not an agent and is operating independently on its own behalf”. A franchisee in these circumstances must register with HMRC in its own right. The franchisee is responsible for complying with anti-money laundering obligations and other legal and regulatory requirements.
Need help?
Book a free consultation
There’s no commitment, pressure, or obligation.