Author: Azizur Rahman
26 January 2016
3 min read
Estate agents are traditionally thought of as being quite steady, conservative types. Whether you have a high or low opinion of them, we tend to think of those in estate agencies as risk averse. And yet the National Association of Estate Agents (NAEA) has admitted that its members are doing little to tackle money laundering.
In a rather frank statement of affairs, the NAEA has stated that “take up has been low” in its bid to persuade each of its affiliated estate agents to nominate a money laundering reporting officer and deputy. As part of its attempt to keep the laundering of criminal proceeds out of its profession, the NAEA has been meeting with HM Revenue and Customs (HMRC) every three months and hosting free prevention masterclasses for members.
But despite this, its attempts to have estate agents appoint someone responsible for identifying money laundering appear to have fallen on deaf ears. It is highly possible that the approach being taken by many estate agents is one of “see no evil”. They know, thanks to the efforts of the NAEA, what money laundering is and how it may be committed but feel no responsibility to either prevent or identify it.
Without wishing to climb into the mind of estate agents, this can only be for one of two reasons. They either think that money laundering is not happening in any way that involves their business or they feel that it may be but believe they can turn a blind eye. In short, they are being either unintentionally or deliberately ignorant. But whatever the reason, this approach is a dangerous one.
Since the beginning of the 2014-15 financial year, HMRC has been responsible for monitoring the risk of money laundering among estate agents; in accordance with the Money Laundering Regulations 2007. This is at least part of the reason it has its regular meetings with the NAEA – and why the Association is so keen to stress the need for awareness among its members. In recent years, mortgage brokers, surveyors, developers and financial advisors have all fallen foul of the law in relation to fraud and / or money laundering. Only a very ill-informed estate agent could continue in business without taking any steps to prevent themselves suffering a similar fate.
The Money Laundering Regulations, the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 all emphasise the duty of those working in property to know where the money they are handling originated. Estate agency is what is classed as a regulated sector – a sector of work which carries a risk of contact with those looking to launder the proceeds of crime. This is a major reason why the HMRC published a 41-page document outlining what estate agencies should do to avoid problems with money laundering. With unlimited fines and up to two years in prison the possible punishments for those failing to prevent money laundering - and with senior managers able to be held personally liable - the document emphasises the need to both identify and manage any risk.
As a result, estate agents are expected to take a risk-based approach – including the appointment of an officer to report suspicious activity. There can now be no doubt that estate agents are obliged to devise and execute procedures to prevent money laundering. Identity checks, due diligence and accurate and contemporaneous records are all part of this. The estate agent who fails to do any or all of this is increasing both the risk of money laundering happening and the risk that they will be held criminally liable.
POCA makes it an offence to fail to report suspicion of money laundering. It also emphasises that those in the regulated sector must submit such a report as soon as possible if they know, suspect or have reasonable grounds to know or suspect that a person is engaged in, or attempting, money laundering or terrorist financing.
Estate agents could easily fall foul of POCA if they do not pay due care and attention to the origins of a would-be house buyer’s wealth. Some of them may argue that they should not be the ones having to check on the nature of the money being used to buy a property. It is an understandable viewpoint that may gain sympathy from certain quarters. But this is not a viewpoint that you can fall back on to help you escape a conviction for money laundering; which can carry a sentence of up to 14 years. Ignorance of the law and ignorance of money laundering being committed under your nose will leave you with little scope for a strong legal defence if and when you come under investigation.
Due to their unique position close to people with large amounts of money to spend, estate agents (and everyone else working in property) must make sure they can identify money laundering or the signs that indicate it may be going on. We talked about due diligence earlier but expert legal advice is always available for those working in property who do not know how to tackle the problem of money laundering.
No one is saying that money laundering is easy to spot. Nobody is saying that estate agents are the only ones expected to try and identify instances where the proceeds of crime are being laundered. But the authorities have placed a responsibility on estate agents to do what they can to combat money laundering.
The admission from the NAEA indicates that few estate agents are comfortable when it comes to taking on this responsibility. But whether they find it comfortable or not, they have to take it on.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.