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This publication is available at https://www.gov.uk/government/publications/money-laundering-regulations-2007-supervision-of-estate-agency-businesses/estate-agency-guidance-for-money-laundering-supervision
If your business is supervised by HMRC for anti-money laundering purposes, you will need to meet the approval requirements covered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
These requirements make sure that the businesses’ beneficial owners and senior management are the right people to take on those roles.
Leading personnel must pass the relevant approval checks before your business can register (and remain registered) with HMRC.
HMRC confirms the requirements do not test if your business is professionally run or operated. Registration is a legal requirement to trade, it is not a recommendation or endorsement of the business.
HMRC advises registered businesses to avoid using language that might give the impression that registration was an endorsement or recommendation.
There is more detail about these requirements in the HMRC approval guidance.
1. Money laundering and estate agency businesses
1.1 Money laundering is how criminals change money and other assets into clean money or assets that have no obvious link to their criminal origins. Money laundering can take many forms, but in the property sector it can involve:
- buying a property asset using the proceeds of crime, letting it or selling it on, giving the criminal an apparently legitimate source of funds
- criminals hiding behind complex company structures involving multiple countries and multiple bank accounts to disguise the real purpose of a transaction and hide its beneficial ownership
- a more direct method of paying an estate agency business or lettings agent a large amount and reclaiming it later
- the money for a purchase resulting from a mortgage fraud operation
Many estate agency businesses may not handle client money but will have knowledge of both parties to a transaction, other intermediaries and how a purchase is funded. Other estate agency businesses, such as auctioneers may handle deposits.
1.2 Tax evasion is a criminal offence that can lead to money laundering, for example, the sale price of a property may be set below the Stamp Duty threshold by manipulating the price of furniture and fittings. Tax may also be evaded by hiding behind complex legal structures. The proceeds of crime include the proceeds of corruption and super-prime property is an attractive way for individuals to hide this money.
1.3 Terrorist financing involves dealing with money or property that you have reasonable cause to suspect may be used for terrorism. The funds and property may be gained from either legitimate or criminal sources. This may be small amounts.
1.4 The primary UK legislation covering anti money laundering and counter-financing of terrorism is:
- Proceeds of Crime Act 2002
- Terrorism Act 2000
- Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (referred to in this guidance as ‘the Regulations’)
- Criminal Finances Act 2017
- Terrorist Asset-Freezing Act 2010
- Anti-terrorism, Crime and Security Act 2001
- Counter terrorism Act 2008, Schedule 7
Information on Sanctions can be found through:
- HM Treasury Sanctions Notices
- news releases
The Proceeds of Crime Act sets out the primary offences related to money laundering:
- concealing, disguising, converting, transferring or removing criminal property from the UK
- entering into or becoming involved in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person
- the acquisition, either use or possession, or both, of criminal property
The primary money laundering offences apply to everyone, and you commit an offence if you know or suspect that the property is criminal property.
1.5 Under the Proceeds of Crime Act it is also an offence to fail to report suspicious activity and tipping off any person that you’ve made such a report. This applies to nominated officers and employees of businesses in the regulated sector, such as estate agency businesses.
This duty extends across the whole business, so an estate agency business which also does lettings must also submit suspicious activity reports where suspicion arises within lettings.
1.6 The Terrorism Act sets out the primary offences relating to terrorist funding. Regulated businesses, like estate agency businesses, must report belief or suspicion of offences related to terrorist financing, such as:
- fundraising for the purposes of terrorism
- using or possessing money for the purposes of terrorism
- involvement in funding arrangements
- money laundering - facilitating the retention or control of money that is destined for, or is the proceeds of, terrorism
1.7 The Criminal Finances Act 2017 make important amendments to the Proceeds of Crime Act, the Terrorism Act and the Anti-terrorism Crime and Security Act. It extends the powers of law enforcement to seek further information, recover the proceeds of crime and combat the financing of terrorism. Involvement in money laundering offences may result in either unlimited fines, a prison term of up to 14 years, or both.
It also introduces corporate criminal offences of failing to prevent the facilitation of tax evasion. These offences can result in corporates being found criminally liable for anyone providing services for or on their behalf who criminally facilitates tax evasion.
The defence that corporates can raise is that they had procedures in place to prevent persons associated with the business from aiding tax evasion. HMRC has published guidance to help businesses understand the offences and put processes and procedures in place.
1.8 The Regulations set out what relevant businesses like estate agency businesses, must do to prevent their services being used for money laundering or terrorist financing purposes. This guide focuses on what you must do to meet your obligations in relation to:
- risk assessment
- customer due diligence
- reporting suspicious activity
- record keeping
- staff awareness and training
It also gives information on risk indicators within the sector and information about different types of estate agency businesses.
1.9 The Regulations apply to the following businesses when carried on in the UK:
- estate agents, that is businesses carrying on estate agency work
- credit institutions
- financial institutions
- auditors, insolvency practitioners, external accountants and tax advisers
- independent legal professionals
- trust or company service providers
- high value dealers
Estate agency businesses must comply with the Regulations. They must not carry out estate agency work if they are not registered with HMRC. This is explained in more detail later in this guide.
The Joint Money Laundering Steering Group publishes more information about businesses’ obligations and the level of risk in other jurisdictions (Annex 4-I of part I).
1.10 The Terrorist Asset-Freezing etc. Act 2010 gives HM Treasury power to freeze the assets of individuals and groups reasonably believed to be involved in terrorism, whether in UK or abroad, and to deprive them of access to financial resources.
1.11 The Anti-terrorism, Crime and Security Act 2001 is to make sure the security of dangerous substances that may be targeted or used by terrorist and allows for freezing orders to be made against national security threats and the civil asset seizure regime for terrorism.
1.12 Counter-terrorism Act 2008, Schedule 7 gives powers to HM Treasury to issue directions to firms in the financial sector about customer due diligence, ongoing monitoring, systematic reporting and limiting or ceasing business.
1.13 HM Treasury Sanctions Notices, guidance and news releases, the Office of Financial Implementation (OFSI) publishes a list of all those subject to financial sanctions imposed by the UK. OFSI helps to make sure that these financial sanctions are properly understood through sanction notices, guidance and news releases.
1.14 HMRC is responsible for monitoring your compliance with the UK anti-money laundering regime. In its role as a supervisory authority and a law enforcement authority, HMRC may also use this regime to gather information for tax purposes.
1.15 EU financial sanctions (including where they implement United Nations (UN) sanctions) apply within the territory of the EU and to all EU persons, around the world. UK financial sanctions apply within the territory of the UK and to all UK persons, around the world.
All individuals and legal entities who are within or undertake activities within the UK’s territory must comply with the EU and UK financial sanctions that are in force. All UK nationals and UK legal entities established under UK law, including their branches, must also comply with UK financial sanctions that are in force, no matter where their activities take place.
All EU nationals and legal entities established under EU law must comply with the EU financial sanctions that are in force, no matter where their activities take place.
1.16 The Office of Financial Sanctions Implementation (OFSI) works closely with the EU Commission and other member states in putting in place and enforcing sanctions. The UK imposes sanctions applied by the UN and EU as well as a limited number of its own sanctions (for example, Terrorist Asset-Freezing etc. Act 2010).
1.17 OFSI publishes a list of all those subject to financial sanctions imposed by the UK. OFSI helps to make sure that these financial sanctions are properly understood through sanction notices, guidance and news releases.
You must report to OFSI as soon as practicable if you know or have reasonable cause to suspect that a designated person has committed an offence. You should report any transactions carried out for persons subject to sanctions or if they try to use your services.
You can report a suspected breach, sign up for free email alerts and get information on the current consolidated list of asset freeze targets and persons subject to restrictive measures.
GOV.UK guidance will make clear which regulations apply to each regime, whether it is statutory instruments made under SAMLA, or retained EU law. Stakeholders should check the legislation and guidance that is added to GOV.UK.
1.18 The Data Protection Act 2018 and the General Data Protection Regulation (GDPR) governs the processing of information relating to individuals, including obtaining, holding, use or disclosure of information.
Personal data received by a business under the Regulations may only be processed for the prevention of money laundering and terrorist financing or where use of the data is allowed by other legislation or after getting the consent of the data subject.
You must give new customers a statement that personal data will only be used for the purposes of preventing money laundering and terrorist financing and give them the information as outlined under Article 13 of the GDPR.
The processing of personal data in line with these Regulations is lawful and necessary for the prevention of money laundering or terrorist financing and is for the performance of a task carried out in the public interest.
1.19 If a person or business fails to meet with the Regulations, they may face civil penalties or criminal prosecution. This could result in unlimited fines with a prison term of up to 2 years. You can find information on the penalties HMRC can issue.
Not meeting the regulations may lead to money laundering charges under the Proceeds of Crime Act 2002.
2. Responsibilities of senior managers
2.1 The senior managers of a regulated business are responsible for the oversight of meeting the Regulations and can be held personally liable if they do not take the steps necessary to protect their business from money laundering and terrorist financing.
A senior manager is an officer or employee who has the authority to make decisions that affect your business’s exposure to money laundering and terrorist financing risk. Examples include:
- a director
- company secretary
- chief executive
- member of the management body, or someone who carries out those functions
- any partner in a partnership
- a sole proprietor
Senior managers must:
- identify, assess and manage effectively, the risks that their business may be exploited to launder money or finance terrorists
- take a risk based approach to managing these risks that focuses more effort on high risks
- appoint a nominated officer to report suspicious activity to the National Crime Agency
- devote enough resources to address the risk of money laundering and terrorist financing
2.2 Senior managers are responsible for making sure that the business has carried out a risk assessment for its business and has policies, controls and procedures to help reduce the risk that criminals may exploit the business for financial crime. Your policies, controls and procedures must cover the level of risk that the business may come across in different circumstances.
You must also take account of the size and nature of your business and put in place additional measures to make sure your policies, controls and procedures are being met throughout your organisation including subsidiaries and branches.
2.3 Senior managers must:
- carry out a risk assessment identifying where your business is vulnerable to money laundering and terrorist financing
- take a risk-based approach to managing these risks which will focus more effort on higher risks
- prepare, maintain and approve a written policy statement, controls and procedures to show how the business will manage the risks of money laundering and terrorist financing identified in risk assessments
- review and update the policies, controls and procedures to reflect changes to the risks faced by the business
- make sure there are enough trained people equipped to implement policies adequately, including systems in place to support them
- make sure that the policies, controls and procedures are communicated to and applied to subsidiaries or branches in or outside the UK
- monitor effectiveness of the business’s policy, controls and procedures and make improvements where required
- have systems to identify when you are transacting with persons from or based in high risk third countries identified by the EU , FATF , HMT or financial sanctions targets advised by Office of Financial Sanctions Implementation and take additional measures to manage and lessen the risk
- approve the establishment, or continuation, of a business relationship with a politically exposed person or a family member or known close associate of a politically exposed person
- devote enough resources to deal with money laundering and terrorist financing The risk assessment and policies, controls and procedures should be reviewed in response to changes to your business, the market, and information from HMRC or changes to the legislation otherwise at least, on an annual basis.
3. Risk assessment and policies, controls and procedures
Risk based approach
3.1 A risk based approach is where you assess the risks that your business may be used for money laundering or terrorist financing, and put in place suitable measures to manage and lessen those risks.
A risk based approach should balance the costs to your business and customers with a realistic assessment of the risk that criminals may exploit the business for money laundering and terrorist financing. It allows you to focus your efforts on the most important areas and reduce unnecessary burdens.
Risks your business may face
3.2 Assessing your business’s risk profile will help you understand the risks to your business and how they may change over time, or in response to the steps you take. This will help you design the right systems that will spot suspicious activity, and make sure that staff are aware of what sort of money laundering activities they are likely to come across.
The risk assessment depends on the nature of the business, how it is organised, customers, and activities. For each of these areas you should consider how they could be exposed, for example through the following questions.
3.3 Your risk assessment is how you identify the risks your business is exposed to. You must be able to understand all the ways that your business could be exposed to money laundering and terrorism financing risks, and design systems to deal with them.
3.4 You must take note of information on risk and emerging trends from sources including the National Risk Assessment and HMRCs risk assessment and amend your procedures as necessary
You must also assess, and keep under regular review, the risks including those posed by your:
- customers and counterparties and any underlying beneficial owners (see guidance on customer due diligence on who is a beneficial owner)
- services or transactions
- financing methods
- delivery channels, for example non face to face services
- geographical areas of operation, including sending money to, from or through high risk third countries, for example countries identified by the EU or Financial Action Task Force (FATF) as having deficient systems to prevent money laundering or terrorist financing
Your risk assessment must be in writing and subject to regular review. It needs to reflect changes in your business and the environment that you do business in. At least an annual review of the risk assessment is recommended and any revisions noted in the document.
The risk assessment must be given to HMRC when we ask for it.
In a limited range of circumstances we may tell you that you do not need to keep a record of your risk assessment (if, for example, you are a sole practitioner with no employees, have a small number of well-established clients and where you understand your money laundering and terrorist financing risks). We will expect you to be compliant with the requirements of the Regulations in all other respects. Contact HMRC if you think this applies to you.
3.5 Your risk assessment in relation to customers and services provided should take account of the full range of circumstances associated with a client or buyer based on information you have or behaviours indicating higher risk. The following is not an exhaustive list, but you should consider factors including:
- are sellers or buyers companies, partnerships, or trusts in particular, are there complex or opaque business ownership structures in place, that is, any client which is a legal person, with ownership by another legal person. For example a limited company owned by a beneficial owner indirectly, through another legal entity
- do you act for international sellers or buyers or persons you have not met
- do you accept business from abroad, particularly those based in, or have beneficial owners in, tax havens, or countries with high levels of corruption (Transparency International corruption perception index) or where terrorist organisations operate
- do you accept cash payments, for example, at auction
- do you accept payments that are made to or received from third parties or from overseas accounts
You must also consider the way the seller or buyer comes to the business affect the risk for:
- non face-to-face customers
- does the pattern of behaviour, or changes to it, pose a risk
- if you accept introductions from another agent, sub agent or third party, what is your knowledge and understanding of that agent’s client base? If appropriate are they registered with HMRC
- buyers who may be carrying out large one-off cash transactions
- sellers or buyers that are not local to the area and where another business, local to them, would be better placed to meet their needs
- overseas sellers or buyers especially from a high risk third country identified by the EU, FATF or HMT
- individuals in either public positions, locations that carry a higher exposure to the possibility of corruption, or both (including politically exposed persons)
For further information relating to risk assessments, you can read the UK National Risk Assessment, the EU Supra-National Risk Assessment and FATF risk based approach guidance for estate agents.
3.6 Other situations that may present a higher risk and need to be considered in your risk assessment are covered in the enhanced due diligence, and risk information when dealing with politically exposed persons.
See also suspicious activity reports and Estate Agency Business risk which details some of the specific risks that your business may be subject to.
Policies, controls and procedures
3.7 Your policy statement, being proportionate to the size and nature of the business, must lay out your policy, controls and procedures and how you and other senior managers will manage the business’s exposure to risk. It must make clear how you will manage the risks identified in your risk assessment to prevent money laundering and terrorist financing and take account of any additional risk due to the size and nature of your business.
It must make clear who has responsibility for maintaining, managing and monitoring the policies, controls and procedures.
3.8 Policies, controls and procedures must be in writing and be communicated throughout your organisation to staff, branches and subsidiaries in and outside the UK.
Controls and procedures
3.9 Senior managers must put in place appropriate controls and procedures to reflect the degree of risk associated with the business and its customers.
3.10 You must take into account situations that, by their nature, can present a higher risk of money laundering or terrorist financing and take enhanced measures to address them. The specific measures depend on:
- the type of customer
- identity of the customer
- business relationship
- product or transaction, especially large or complex transactions or unusual patterns of activity that have no apparent economic or lawful purpose
Again, the measures that you put in place to manage risks associated with lower-risk customers should be more moderate. The risk assessment that you conduct should set the nature of your measures for managing money laundering and terrorist financing risks.
3.11 You must also show how you will:
- carry out customer due diligence checks and conduct ongoing monitoring
- identify when a customer or beneficial owner is a politically exposed person or a family member or close associate of a politically exposed person, and do appropriate levels of enhanced due diligence (as described later in this guidance)
- appoint a nominated officer to get reports of suspicious activity from staff and make suspicious activity reports to the National Crime Agency. The nominated officer can delegate responsibilities but must do so clearly and in writing
- make sure the staff are trained to recognise money laundering and terrorist financing risks and understand what they should do to manage these, including the importance of reporting suspicious activity to the nominated officer
- make sure staff are aware of the anti-money laundering policies and procedures you have put in place
- make sure that policies, controls and procedures are followed
- maintain accurate, up-to-date retention and keeping of records
3.12 The following actions are also required to be covered within your policies and procedures and must be kept under regular review:
- make sure identification and acceptance procedures reflect the risk characteristics of sellers and buyers
- take further measures for higher risk situations such as approving transactions at senior management level with politically exposed persons
- make sure low risk situations are assessed and records retained to justify your assessment and that these are in line with the business’s overall risk assessment
- make sure arrangements for monitoring systems and controls are robust, and reflect the risk characteristics of sellers and buyers to the business
- carry out regular assessments of your systems and internal controls to make sure they are working and meet the requirements of the Regulations
- make sure staff training is appropriate to the individual and kept up to date and content regularly reviewed
- staff know the names of the nominated officer and any deputy
3.13 Where the controls you have in place identify any weakness, you should document it and record the action taken to put the problem right.
3.14 The policy of a larger, more complex business must include:
- the appointment of a member of the board of directors (or equivalent body) or senior management (a compliance officer) who has responsibility for monitoring the effectiveness of and compliance with the policy, controls and procedures, including regular reviews to learn from experience
- individual staff responsibilities under the Regulations where this is not confined to the nominated officer
- the process for reviewing and updating the business’s policies, controls and procedures
- the process for auditing the business’s compliance with its policies, controls and procedures
Making relevant appointments within your business
3.15 Every business must have a nominated officer, no matter what size it is. Whether you have a compliance officer will depend on the size and nature of your business.
You must inform HMRC of the names of the compliance and nominated officers within 14 days of the appointment and if there is a change in the post holder.
A sole practitioner who has no employees and who does not act with another person does not need to appoint a compliance or nominated officer but must carry out the duties of the nominated officer themselves.
Appointing a nominated officer for the business
3.16 You must appoint a nominated officer, from within your business, to receive reports of suspicious activity from staff and decide whether to report them to the National Crime Agency. You should also appoint a deputy to act in the absence of the nominated officer.
If you are a sole trader, with no employees, you will be the nominated officer by default, and must report suspicious activity to the National Crime Agency.
The nominated officer should be at an appropriate level of seniority in your business to make decisions on transactions.
You should make sure that your staff know the name of the nominated officer and any deputy and must make certain they receive training on when and how to report their suspicions to the nominated officer (see reporting suspicious activity).
Appointing a compliance officer for larger, more complex businesses
3.17 You must consider whether the size and nature of your business means that you must appoint a compliance officer to make sure your compliance with the Regulations. You should take into account your risk assessment and exposure to money laundering and terrorist financing risk, the number of employees, number of premises, agent network, geographical area you operate in, type of customers, and the complexity of the business.
Businesses with, for example, more premises, use branches or agents, have a high turnover of customers, carry out non-local or cross border trading or have complex ways to deliver services will need a compliance officer. This is so that the business can confirm that, for example, training, record keeping and compliance requirements are monitored and are consistent throughout the organisation.
You may decide that an existing compliance officer, of the required position and level of authority, may be able to take on the additional role.
HMRC would not expect you to appoint a compliance officer where you are a sole trader where you carry out regulated activity from one premises, have no more than 2 or 3 staff and run an uncomplicated business model or organisation.
3.18 Where a compliance officer is needed, the business must appoint a person from the board of directors, its equivalent or senior management.
3.19 The compliance officer will be responsible for the business’s compliance with the regulations including:
- making sure compliance throughout the business (including subsidiaries and branches) with anti-money laundering legislation and internal policies, controls and procedures
- oversight of the screening of relevant staff
They will also be responsible for carrying out regular audits on compliance with the regulations such as:
- actively checking adherence to the policies, controls and procedures
- reviewing how effective these are
- recommending and implementing improvements following such reviews
These functions may be carried out from within the business.
3.20 Relevant staff are persons involved in the identification of risk, carry out controls or procedures to reduce risk or are otherwise involved in your compliance with the Regulations including the receiving of documents from client. Screening means an assessment of the skills, knowledge and expertise of these staff to carry out their functions effectively and the conduct and integrity of the individual.
3.21 It is recommended that the compliance officer and nominated officer in larger businesses should not be the same person. This is because the responsibilities between these roles differ, the compliance officer needs to be at a senior management level and needs to review how the business carries out its obligations, including the reporting of suspicious activity.
However, in some businesses (particularly those that are smaller and have a simple operating model) it may not be practical to have 2 individuals carrying out these functions and a compliance officer may be suitable to also act as nominated officer.
3.22 Given the importance of this role businesses may need to appoint a deputy compliance officer.
HMRC expects the compliance officer and nominated officers to be based in the UK. Where a business is part of a group of companies an individual can carry out these roles for other parts of the group. If each subsidiary has their own compliance officer then one person should have oversight of this at a group-wide level.
Personal liability of officers of a business
3.23 An officer of the business who is knowingly concerned in a breach of the Regulations may be subject to a civil penalty.
They will also be committing a crime if they do not meet with the Regulations. This may result in an unlimited fine and either a prison term, or both, of up to 2 years if:
- the officer agrees to, or is involved in committing a crime
- a crime is committed because of their neglect
Controls and procedures to put in place
3.24 Once you have identified and assessed the risks and warning signs, you must make sure that you put in place appropriate controls and procedures to reduce or deal with them. They will help to decide the level of customer due diligence to apply to each seller, buyer and beneficial owner.
It is likely that there will be a standard level of due diligence that will apply to most sellers and buyers (who will present a relatively low risk of money laundering and terrorist financing), based on your business’s risk assessment.
3.25 Procedures should be easily accessible to staff and detailed enough to allow staff to understand and follow them easily. They must include as a minimum:
- the types of seller, buyer and transactions that you consider to be lower risk and why a client or counterparty may qualify for simplified due diligence and those that are higher risk and merit closer scrutiny
- how to carry out customer due diligence and enhanced due diligence on higher risk persons on individuals and different types of legal entity
- how carry our customer due diligence in the case of more unusual transactions, for example, where you are contacted in respect of a sale by a person with a power of attorney or an executor of a will
- how to identify politically exposed persons and what to do when one is identified, in particular how to identify their source of wealth and source of funds
- what to do if you are dealing with an individual subject to the sanctions regime or who is based in a jurisdiction of concern
- any other patterns or activities that may signal that money laundering or terrorist financing is a real risk and what to do if these are identified
- how to keep records, and where and for how long they should be kept
- how and when to conduct ongoing monitoring of transactions and customers
- clear staff responsibilities and the name and role of the nominated officer and when reference must be made to these individuals
- how to report suspicious activity to the nominated officer, and how the nominated officer should make a report to the National Crime Agency
- how and when staff are trained and how that training is recorded
- how to audit and monitor the policies and procedures and the internal controls in place to make sure that the policies and procedures are followed correctly by staff
3.26 Identifying a seller, buyer or transaction as high risk does not automatically mean that they are involved in money laundering or terrorist financing. Similarly, identifying a seller, buyer or transaction as low risk does not mean that they’re not involved in money laundering or terrorist financing.
Your risk assessment of a customer or counterparty should affect the extent of due diligence measures and scrutiny that you apply to them. Declining a business relationship need only be a last resort, when you have concluded that it is not possible to effectively manage the money laundering and terrorist financing risks associated with a particular customer.
Effectiveness of the controls
3.27 Managing the money laundering and terrorist financing risks to your business is an ongoing process, not a one-off exercise. You must document the risk assessment and policies, procedures and controls, such as internal compliance audits, as this helps to keep them under regular review.
You should have a process for monitoring whether they are working effectively, and how to improve them, for example to reflect changes in the business environment, such as new product types or business models.
3.28 Compliance audits must be documented indicating the branch visited, files reviewed, staff spoken to and whether the check was satisfactory or not. If it is not satisfactory then the remedial action taken must be recorded.
Managing group subsidiaries
3.29 A parent company who is subject to the Regulations must apply its policies, controls and procedures in all subsidiaries or branches, in or outside the UK, who are also carrying out regulated activities. The subsidiary or branch outside of the UK is within UK scope if they are engaging in activity as stated within the Estate Agents Act for properties within the UK. This will involve:
- putting in place controls for data protection and information sharing to prevent money laundering and terrorist financing
- sharing information on risk within the corporate group
- making sure subsidiaries or branches in EU member states are complying with the money laundering and terrorist financing requirements of that country
- making sure that subsidiaries or branches in a third country (for example, a non EEA state) are applying anti money laundering and counter terrorist financing requirements that are equivalent to those required by the UK (as far as permitted under the law of that third country). Where a third country does not allow similar measures you must put in place extra controls to deal with this risk and inform HMRC
4. Customer due diligence
4.1 You must:
- complete customer due diligence on all customers and beneficial owners before entering into a business relationship or occasional transaction
- complete due diligence on the counterparty and any beneficial owners, involved in the property sale
- have procedures to identify those who cannot produce standard documents, for example, a person not able to manage their own affairs
- identify and verify a person acting on behalf of a customer and verify that they have authority to act for example, someone acting on behalf of a company or trust
- apply enhanced due diligence to take account of the greater potential for money laundering in higher risk cases, including in respect of politically exposed persons
- identify politically exposed persons, their family members and close associates and verify their identity, source of wealth and/or funds. You must also have a procedure in place so that a senior manager can consider whether to do business with that person
- apply customer due diligence, when you become aware that the circumstances of an existing customer relevant to their risk assessment has changed
- not deal with certain persons or entities if you cannot carry out customer due diligence, and consider making a suspicious activity report
- have a system for keeping copies of customer due diligence and supporting records and keep the information up to date
4.2 Estate agency businesses do not commonly handle the funds used to buy a property. However, they are a main facilitator in a property sale and come into contact with both parties to the transaction at an early stage and so are in an ideal position to identify suspicious activity.
4.3 The customer is the person or entity with whom the estate agency business forms a business relationship which is also usually a contractual relationship, often referred to as the client. This can be a seller (that is the owner or owners of the property or other interest in land) or the person, or persons, who buys the property. For sales agents, it is usually the vendor, although in the case of repossessions it may be a lender. A property finder will normally act for a buyer to find a property. An auctioneer may act for sellers, buyers and bidders.
4.4 The Regulations state that an estate agency business enters into a business relationship with both parties to the transactions, that is, both the property seller and the property buyer at the point in which the purchasers offer is accepted by the seller. Section 4.13 defines what the guidance perceives as offer acceptance.
The person who is not a customer in the commercial sense (the counterparty), must be treated in the same way as a customer for the purposes of the Regulations, for example, the same obligations to apply an appropriate level of customer due diligence.
Customer due diligence
4.5 You must carry out customer due diligence on your customer and the counterparty to the transaction. The level of due diligence will depend on your risk assessment of each person in line with your overall risk assessment.
4.6 You must verify that both parties to the property sale are who they say they are. This is often referred to as ’know your customer’, or exercising customer due diligence. You must carry out customer due diligence on all customers, even if you knew them before they became your customers. This is because you must be able to demonstrate that you know all your customers.
If, to verify the identification of your customer, you are accepting notarised copies of documents, you will also need to satisfy yourself that the notary is who they say they are, and are allowed to notarise the relevant documents.
4.7 You must undertake customer due diligence when:
- establishing a business relationship with a seller and buyer
- carrying out an occasional transaction with a customer
- money laundering or terrorist financing is suspected
- you suspect that information obtained for due diligence checks on a seller or buyer is not reliable or adequate
Business relationship with a customer
4.9 A business relationship is formed with a business’ direct customer when, on establishing contact, the business expects the relationship with the customer to have an element of duration. A business relationship is formed no later than when a contractual relationship is formed and may be formed before that. In some cases the estate agency business and the customer will not have a contract in writing.
Timing in relation to a customer
4.10 The customers’ identity and where applicable the identity of beneficial owners, must be verified before entering into a business relationship or occasional transaction.
You can make an exception to when customer due diligence is carried out on any party to a sale only if both the following apply:
- it is necessary not to interrupt the normal conduct of business
- there is little risk of money laundering or terrorist financing
4.11 However, this exception is very limited and the verification must still be completed as soon as practicable after contact is first established. Even when it is available, it allows for the verification to be completed only during the course of setting up the business relationship and so it must be completed by the time that the relationship is established which is not later than when there are contractual liabilities. Nor does this exception mean that you can use it where it is hard to verify a customer’s or beneficial owner’s identity.
To use this exception, a business will have to explain in its risk assessment why it considers certain types of business relationship or transaction has little risk of money laundering or terrorist financing.
Business relationship with the counterparty
4.12 In the case of a sales agent, a business relationship is entered into with a buyer, who is not the customer, when the buyer’s offer is accepted by the seller.
In the case of a relocation agent, property finder or investment broker, a business relationship is also formed with the seller, no later than at the point the buyer’s offer is accepted. In this case the buying agent may well be able to rely on the customer due diligence carried out by a sales agent (and vice versa) with their consent, rather than carrying out due diligence checks themselves - see ‘Reliance on third parties’.
Prospective buyers are not included in a business relationship unless they are a customer, for example an auctioneer may charge a fee to a bidder for participating in an auction (see above). The bidder is a customer of the auctioneer.
Timing in relation to the counterparty to a property sale
4.13 The formal acceptance of an offer is considered to take place at exchange of contracts. Therefore, where the customer due diligence obligation on the buyer arises, this must take place and be completed before a binding contract is entered into. This is normally when:
- contracts are exchanged
- a binding contract is entered into
- a sealed bid is opened, if a binding contract is entered into
If these events do not create a binding contract, customer due diligence must still be completed before the point at which the sale becomes final.
4.14 In order to make sure customer due diligence is completed on time you may consider that a helpful trigger point to begin the process of customer due diligence would be around the time when the terms are agreed, normally on the signing of a Memorandum of Sale in residential sales or Heads of Agreement in commercial sales.
In practice this means that customer due diligence should be carried out as early as possible on the counterparty. Selling agents should advise a serious prospect that customer due diligence will have to be carried out at the time of acceptance of the offer, or before, so that they have evidence to hand, to prove identity.
4.15 In the case of an auction customer due diligence must be carried out before a binding contract is entered into. This may be achieved by either:
- pre-registering bidders so that customer due diligence is carried out before the hammer falls
- creating a condition precedent (that customer due diligence is undertaken) so that the contract is not binding until customer due diligence is completed
Either of these would satisfy the requirement to carry out customer due diligence before the point when the buyer’s offer is accepted by the seller. For the purposes of regulation 4(3), where a condition precedent exists the business relationship will not be entered into on the payment of the deposit alone; only when the condition is fulfilled and customer due diligence has taken place.
The bidders should be pre-warned to bring sufficient evidence to enable an appropriate level of customer due diligence to be carried out.
4.16 If any person is not prepared to prove who they are you must terminate the business relationship and consider completing a suspicious activity report.
4.17 If, prior to the timings given above, the counterparty has agreed terms with a conveyancer or estate agency business to act for them you may be able to rely on the customer due diligence that the third party has carried out if they are prepared to agree to be relied on (see ‘Reliance on third parties’).
Situations where you do not need to carry out customer due diligence on the counterparty
4.18 You do not need to carry out customer due diligence on persons who:
- respond to, for example, marketing campaigns by requesting further information on property such as location, details of the sale or nature of property as these may not result in any further contact or interest and are at a stage much earlier than the point at which a buyer’s offer is accepted by the seller
- a potential buyer makes an offer to the seller after your contractual relationship with your client has come to an end and you are therefore, no longer in a business relationship with the seller
Situations where an estate agency business may not be able to comply with the duty to do customer due diligence before exchange
4.19 You will be aware of who the buyer is in most cases. In some circumstances an estate agency business will genuinely not be aware of an offer from a buyer, will not be aware of the identity of the buyer or will become aware of the buyer at a late stage.
Estate agency business is unaware of sale
4.20 This may occur, for example, where a seller finds the buyer themselves and excludes the estate agency business, where another estate agency business finds a buyer in a joint agency arrangement and the first business is not aware of this, or where the buyer makes an offer of which the business is not aware direct to the developer the business is acting for.
4.21 In such situations, a business who is genuinely not aware of an offer being made will be considered to have taken all reasonable steps and exercised all due diligence to avoid contravening the requirement to carry out customer due diligence on the buyer, if that agent has included, in their contract with the seller (and where applicable a contract between a principal and sub-agents), terms that provide that the information on the buyer – and any changes in those details - will be given to the business in sufficient time and prior to exchange to allow the business to carry out appropriate customer due diligence.
Estate agency business is unaware of final buyer
4.22 The buyer may change at a late stage, without the knowledge of the estate agency business, after they have ceased to be involved in the transaction (so the business has carried out customer due diligence on the wrong buyer).
4.23 An agent who is genuinely not aware of late change of buyer will be considered to have taken all reasonable steps and exercised all due diligence to avoid contravening the requirement to carry out customer due diligence on the buyer, if that agent has taken reasonable steps to stay informed of changes.
This should include provision in their contract with the seller that provide that the details of the prospective buyer – and any changes in those details – should be advised to the business in sufficient time and prior to exchange to allow the business to carry out appropriate customer due diligence.
Estate agency business becomes aware of a buyer close to exchange
4.24 This may occur, for example, where an EAB, other than the agent who introduced the buyer or forwarded the buyer’s offer, becomes aware of a buyer close to exchange with insufficient time to complete customer due diligence.
4.25 An agent who became aware of such a buyer and was (at the point of exchange) genuinely making conscientious and appropriate efforts to complete customer due diligence, will be considered to have taken all reasonable steps and exercised all due diligence to avoid contravening the requirement to carry out customer due diligence on the buyer.
4.26 HMRC considers that the EAB who forwarded the buyers’ offer or who introduced the buyer will have had time and opportunity to complete customer due diligence on the buyer before exchange of contracts and is less likely to be able to demonstrate that they had insufficient time or opportunity to complete customer due diligence.
Failing to do customer due diligence when an estate agency business is aware of the sale and the buyer
4.27 In any other case the EAB is required to undertake customer due diligence. If they are unable to obtain sufficient information to do customer due diligence, they should terminate their relationship with the seller and consider submitting a suspicious activity report.
In obtaining sufficient information, the business must make sure they are complying with the regulations, as well as their own risk assessment and policies, controls and procedures.
4.28 Where a suspicion of money laundering or terrorist financing arises you must consider reporting the circumstances to the National Crime Agency.
4.29 In most cases a property sale involves an element of duration so will be a business relationship rather than an occasional transaction.
Extent of customer due diligence
4.30 The extent of customer due diligence measures depends on the degree of risk. It depends on the type of seller or buyer, business relationship, product or services provided and any geographical risk which will be covered within your business risk assessment.
It goes beyond simply carrying out identity checks to understanding who you are dealing with. This is because it is important that changes in the client’s business appetite is monitored so the estate agent can make sure their client remains consistent within the stipulated risk assessment for their business model. For example, where their personal circumstances change or they face some new financial pressure.
Your customer due diligence measures and knowing your customer should reduce the risk of this and the opportunities for staff to be influenced.
This means that you will need to consider the level of identification, verification and ongoing monitoring that is needed depending on the risks you assessed. You must be able to show that the extent of these procedures is appropriate when asked to do so.
Non-compliance with customer due diligence
4.31 If you cannot comply with the customer due diligence measures, you must not:
- carry on estate agency work with, or for, the seller or buyer
- establish a business relationship or carry out an occasional transaction with the seller or buyer
4.32 If you cannot comply with the customer due diligence measures, for example, the individual is not willing to prove their identity, you must:
- terminate any existing business relationship with the seller or buyer
- consider whether to make a suspicious activity report
Ongoing monitoring of a business relationship
4.33 You must continue to monitor a business relationship after it is established and for its duration. This means you must monitor transactions, and where necessary the source of funds, to make sure they are consistent with what you know about the seller or buyer and their risk assessment.
4.34 For an ongoing business relationship you must also keep the information you collect up-to-date in line with your risk assessment. It should be checked periodically and reviewed where you become aware of a change, for example, a change to a legal entity.
4.35 An occasional transaction is a transaction of €15,000 cash or more (or the sterling equivalent) that is not part of an ongoing business relationship, for example, selling of small plots or a purchase of property or land at auction. It also applies to a series of transactions totalling €15,000 or more, where there appears to be a link between transactions.
4.36 The value of the transaction here means the gross value of the property transaction, not the value of your fees.
4.37 Beneficial owners are individuals who ultimately own or control the customer, or on whose behalf a transaction or activity takes place. Examples of beneficial owners include:
- the vendor or purchaser customer of a principal agent (the agent with a direct relationship with the customer) for whom you are a sub-agent
- a purchaser customer of a company for whom you are providing property finding services
- any co-owners of a property who are not your customer whatever the share held
4.38 For a corporate body that is not a company whose securities are listed on EEA regulated markets and certain other regulated markets, for example, in USA, Japan, Switzerland and Israel, a beneficial owner is any individual who:
- owns or controls over 25% of the shares or voting rights
- ultimately owns or controls whether directly or indirectly including bearer shares (this would be of a higher risk) holdings or other means, more than 25% share or voting rights in the business
- holds the right, directly or indirectly, to appoint or remove a majority of the board of directors
- has the right to exercise, or actually exercises, significant influence or control over the corporate body
- exercises ultimate control over the management
- controls the corporate body
If shares or rights are held by a nominee, the beneficial owner will be the person for whom the nominee is acting. If the nominee is acting for a legal entity, then the beneficial owner will be the beneficial owner of the legal entity.
If an individual has significant control over a company but is not a shareholder or a director of the company, it is good practice to obtain evidence of this, as part of the customer due diligence.
4.39 A joint interest is where 2 or more people hold the same shares or voting rights in a company. A joint arrangement is where 2 or more people arrange to exercise all or substantially all of their rights arising from their shares jointly in a way which is pre-determined.
Where joint interests or joint arrangements are concerned, each person holds the total number of shares or rights held by all of them. So if 2 or more people hold jointly more than 25% of the shares or voting rights, each of them is a beneficial owner.
As well as companies incorporated under the Companies Acts, other entities including limited liability partnerships, industrial and provident societies and some charities (often companies limited by guarantee or incorporated by an Act of Parliament or Royal Charter) are corporate bodies.
4.40 For a partnership that is a body corporate (other than a limited liability partnership), a beneficial owner is any individual who:
- ultimately is entitled to or controls, whether directly or indirectly, more than 25% of the capital or profits of the partnership
- ultimately is entitled to or controls, whether directly or indirectly, more than 25% of the voting rights in the partnership
- satisfies one or more of the conditions in Part 1 of Schedule 1 to the Scottish Partnership (Register of People with Significant Control) Regulation 2017 (guidance at section 2 Scottish qualifying partnerships guidance)
- exercises ultimate control over the management
4.41 For a trust, a beneficial owner includes:
- the settlor
- the trustees
- the beneficiaries
- where the individuals (or some of the individuals) benefiting from the trust have not been determined, the class of persons in whose main interest the trust is set up, or operates
- individuals who exercise control over the trust
4.42 Control means a power exercisable alone, jointly with another person or with the consent of another person under the trust instrument or by law to:
- dispose of, advance, lend, invest, pay or apply trust property
- approve proposed trust distributions
- vary or terminate the trust
- add or remove a person as a beneficiary or to or from a class of beneficiaries
- approve the appointment of an agent or adviser
- appoint or remove trustees or give another individual control over the trust
- resolve disputes amongst the trustees
- direct, withhold consent to or veto the exercise of a power mentioned above
4.43 For a foundation or other legal arrangement similar to a trust the beneficial owner includes the individuals with similar positions to a trust.
4.44 For other legal entities, or arrangements that administer or distribute funds, a beneficial owner includes:
- individuals who benefit from the entity’s property
- where beneficiaries have not been established, the class of persons in whose main interest the entity or arrangement is set up or operates
- any individual who exercises control over the property
4.45 For the estate of a deceased person in the course of administration, a beneficial owner means:
- the executor (original or by representation) or administrator for the time being of a deceased person in England, Wales or Northern Ireland
- the executor for the purposes of the Executors (Scotland Act) 1900 in Scotland
4.46 A beneficial owner in any other case is the individual who ultimately owns or controls the entity or on whose behalf a transaction is being conducted.
4.47 In a sub-agency arrangement the beneficial owner is the vendor customer or, for relocation sub agents, the purchaser customer of the principal agent. Customer due diligence must be carried out accordingly.
If the sub-agent has contact with the principal agent’s customer, the sub-agent may have to carry out customer due diligence measures on the vendors or purchasers as customers of the sub-agent, rather than as beneficial owners. The greater the level of contact with the vendor or purchaser, the more likely they are to be deemed to be customers of the sub-agent.
Subject to the criteria in ‘Reliance on third parties’, sub-agents may be able to rely on the customer due diligence carried out by a principal agent.
Simplified due diligence
4.48 Your business may apply a simplified form of customer due diligence in some cases.
Simplified due diligence is where the business relationship or transaction is considered low risk in terms of money laundering or terrorist financing. It can apply to any person you assess as low risk with some exceptions. Some examples of potential lower risk factors are highlighted below in 4.53
4.49 You will have to risk assess the seller and buyer to establish that they are low risk, that is, you will have to detail why they are low risk and document that assessment.
4.50 This does not mean you do not have to do customer due diligence, and you are still required to identify and verify customers’ identity and identify, and take reasonable measures to verify, beneficial owners’ identity. Under simplified due diligence however, you can change when it is done, how much you do, or the type of measures you take to identify and verify a person. For example:
verifying the customer or, take reasonable measures to verify the beneficial owners identity:
- during the establishment of a business relationship or
- within a reasonable time, which HMRC would expect to normally be no more than 14 days from the start of the business relationship or transaction (this does not mean exemption from customer due diligence and any delay to customer due diligence must not be prohibited by any other legal requirement you are subject to)
using at least one authoritative identity document to verify identity that:
- demonstrates the person’s name, and (at least) either their address or date of birth
- contains security features that prevent tampering, counterfeiting and forgery
- has been issued by a recognised body that has secure identity proofing measures, for example passport
- using information you already have to determine the nature or purpose of a business relationship without requiring further information, for example, if your customer is a pension scheme you can assume what the purpose of that scheme is
- adjusting the frequency of customer due diligence reviews, for example, to when a change occurs
If verification is not immediate your system must be able to pick up on these cases so that verification of identity takes place.
4.51 To apply simplified due diligence you need to make sure that:
- it is supported by your customer risk assessment
- enhanced due diligence does not apply
- you monitor the business relationship or services provided to make sure that there is nothing unusual or suspicious from the outset
- it is not prevented by information on risk provided by HMRC or any other authority in periodically published risk assessments
- the seller or buyer is not from a high risk third country identified by the EU, FATF or HMT
- the buyer or seller is not a politically exposed person, or a family member or known close associate of one
- the buyer or seller is seen face to face as is any co-owner
- the source of funds or wealth for the sale and purchase are transparent and understood by your business
- a sale or purchase is not complex or unusually large, for example, over £1million for a residential sale, although your risk assessment may indicate that a lower sum would be considered large in your geographical location
- the buyer or seller is not resident outside the UK
- the property is not buy to let
- if the buyer or seller is not an individual, that the legal entity is not registered or administered outside of the UK
- if the buyer or seller is not an individual, that there is no beneficial ownership beyond a single UK legal entity customer
4.52 To decide whether a seller or buyer is suitable for simplified due diligence you must consider them to be low risk under all the factors to be considered in a risk assessment – see risk assessment above.
4.53 Type of customers that may indicate lower risk include:
- a public authority or publicly owned body in the UK
- a financial institution that is itself subject to anti money laundering supervision in the UK or equivalent regulation in another country (assessed in accordance with paragraph 4.54 below)
- a company whose securities are listed on a regulated market
- beneficial owners of pooled accounts held by a notary or independent legal professional, provided information on the identity of the beneficial owners is available upon request
- a European Community institution
- a pension scheme that does not allow assignment of interests
4.54 Geographical factors that may indicate a lower risk include:
- resident or established in another EU state
situated outside the EU in a country:
- subject to equivalent anti money laundering measures
- with a low level of corruption or terrorism
- has been assessed by organisations such as FATF and the FATF-style
Regional Bodies as having in place effective anti-money laundering measures.
4.55 The Joint Money Laundering Steering Group publishes more information about the level of risk in other jurisdictions (Annex 4-I of part I).
4.56 You must consider all of the factors, for example a customer from another EU state is not automatically low risk simply because they are from the EU. For example, the client could be from one EU state, which is owned by a trust within another EU state with the beneficial ownership in another EU state – this level of complexity would increase the risks. All of the information you have on a customer must indicate a lower risk.
4.57 You will need to record evidence, as part of your customer risk assessment, that a party to the sale is eligible for simplified due diligence. You will also need to conduct ongoing monitoring in line with your risk assessment.
4.58 You must not automatically assume that a party to the sale is low risk to avoid doing an appropriate level of customer due diligence. Persons or businesses well established in the community or persons of professional standing or who you have known for some time, may merit being categorised as low risk but you still must have evidence to base this decision on.
Your decision may be tested by HMRC during compliance visits on the basis of the evidence that your business holds.
4.59 A business or person who has strong links to the community, is well established with a clear history, is credible and open, does not have a complex company structure, where the source of funds are transparent and where there are no other indicators of higher risk may be suitable, subject to your risk assessment, for simplified due diligence.
4.60 You must not continue with simplified due diligence if:
- you suspect money laundering or terrorist financing
- you are in doubt whether documents obtained for identification are genuine
- you doubt whether the person is the one demonstrated by the documentation
- you suspect that the documents obtained for identification maybe lost, stolen or otherwise fraudulently acquired
- your circumstances change and your risk assessment no longer considers the customer, transactions or location as low risk
Enhanced due diligence
4.61 ‘Enhanced due diligence’ applies in situations that are high risk. It involves taking additional measures to identify and verify the seller and buyer’s identity and doing additional ongoing monitoring. In the case of PEPs this will include source of funds.
4.62 You must do this when:
- you have identified in your risk assessment that there is a high risk of money laundering or terrorist financing
- HMRC or another supervisory or law enforcement authority provide information that a particular situation is high risk in published material or where, for example, a law enforcement interest has been registered with the Land Registry
- a seller or buyer is from a high risk third country identified by the EU, FATF or HMT
- a person has given you false or stolen documents to identify themselves (immediately consider making a suspicious activity report)
- a seller or buyer is a politically exposed person, an immediate family member or a close associate of a politically exposed person
- the transaction is complex, such as, in the case of legal entities it has more than 2 levels of ownership, though this is dependent on what the business identifies as irregular based on their experiences
- the purchase or sale is unusually large for your type of business, location or for the individual
- a residential property is a super prime property. What a business identifies as super prime would be reflective of factors such as the region and the competitiveness of the market, usually within the top 5% of the local market values
4.63 A branch or subsidiary of an EU entity located in a high risk third country which fully complies with the parent’s anti money laundering policies, controls and procedures and where the parent is supervised under the fourth Directive may not be subject to enhanced due diligence if your risk assessment finds it is not high risk.
4.64 You must consider a number of factors in your risk assessment when deciding if enhanced due diligence needs to be applied – see ‘risk assessment’ above. The following are some examples of things to take account of.
4.65 Customer factors based on information you have or behaviours indicating higher risk, such as:
- any unusual aspects of a business relationship
- a person is resident in a high risk area or country
- use of a legal person or arrangement used to hold personal assets
- a company with nominee shareholders or shares in bearer form
- a person or business that has an abundance of cash or funds with no apparent source
- an unusual or complex company structure given the nature of the type of business
- searches on a person or associates show, for example, adverse media attention, disqualification as a director or convictions for example, fraud, money laundering, bribery or corruption
4.66 How the transaction is paid for or specific requests to do things in a certain way may indicate higher risk, for example:
- if the customer is a corporate body, use of private banking
- anonymity is preferred
- a person is not physically present
- payment from third parties with no obvious association
- involves nominee directors, nominee shareholders or shadow directors, or a company formation is in a third country
4.67 Geographical factors indicating higher risk, including:
countries identified by a credible source as:
- not subject to anti money laundering or counter terrorist measures equivalent to the EU
- having a significant level of corruption, terrorism or the supply of illicit drugs
- subject to sanctions or embargoes issued by EU or UN
- providing funding or support for terrorism
- having organisations designated under domestic sanctions legislation or ‘proscribed’ by the UK
- having terrorist organisations designated by the EU, other countries and international organisations
countries that have been assessed by organisations such as FATF, World Bank, Organisation for Economic Co-operation and Development and the International Monetary Fund as not implementing measures to counter money laundering and terrorist financing that are consistent with the FATF recommendations
Additional measures to take
4.68 If enhanced due diligence is appropriate, then 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 policies, controls and procedures. For example:
- obtaining additional information or evidence to establish the identity from independent sources such as more documentation on identity or address or electronic verification alongside manual checks
- taking additional measures to verify the documents supplied such as by checking them against additional independent sources, or requiring that copies of the customer’s documentation are certified by a bank, financial institution, lawyer or notary who are competent at document inspection and impostor detection, or a person from a regulated industry or in a position of trust
- if receiving payment, ensuring it is made through a bank account in the name of the person you are dealing with
- taking more steps to understand the history, ownership, and financial situation of the parties to the transaction
- in the case of a politically exposed person establish the source of wealth (origin of the customer’s overall wealth) and source of funds (origin of the funding of the transaction)
- carrying out more scrutiny of the business relationship and satisfying yourself that it is consistent with the stated purpose
- more regular and stringent ongoing monitoring checks (as per the business’ policies and procedures)
4.69 If the original documents are not produced for verification, or cannot be validated with the issuing source, then any certified document used as part of the customer due diligence measures must have:
- a statement that the document is ‘Certified to be a true copy of the original seen by me’ and where appropriate, ‘This is a true likeness of the person’ from a person who is competent at document inspection and impostor detection, such as a person from a regulated industry or in a position of trust
- an official stamp of the person certifying and indication of professional status
- been signed and dated with a printed name
- the occupation and address or telephone number
4.70 You must make sure that the person certifying the copy exists and is an appropriate person to certify the document.
4.71 Certifying a copy of a document does not constitute enhanced due diligence.
Politically exposed persons
4.72 Politically exposed persons are persons that are entrusted with prominent public functions, held in the UK or abroad. The definition does not include:
- middle ranking or more junior officials (However, your risk assessment should consider whether they may be representing someone who is a politically exposed person)
- persons who were not a politically exposed person under the 2007 regulations where they ceased in office prior to 26 June 2017, such as former MPs or UK Ambassadors
In the UK, public servants below Permanent or Deputy Permanent Secretary will not normally be treated as having a prominent public function.
4.73 Politically exposed persons include:
- heads of estate, heads of government, ministers and deputy or assistant ministers
members of parliament or similar legislative bodies:
- includes regional governments in federalised systems and devolved administrations, including the Scottish Executive and Welsh Assembly, where such bodies have some form of executive decision-making powers
- does not include local government in the UK but it may, where higher risks are assessed, be appropriate to do so in other countries
members of the governing bodies of political parties
- member of a governing body will generally only apply to the national governing bodies where a member has significant executive power (for example, over the selection of candidates or distribution of significant party funds)
- political parties who have some representation in a national or supranational Parliament or similar legislative body
members of supreme courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances, in the UK:
- this includes judges of the Supreme Court
- does not include any other member of the judiciary
- members of courts of auditors or boards of central banks
ambassadors, and high ranking officers in the armed forces where persons holding these offices on behalf of the UK government are:
- at Permanent Secretary or Deputy Permanent Secretary level
- or hold the equivalent military rank, for example Vice Admiral, Lieutenant General
- or Air Marshal
- members of the administrative, management or supervisory bodies of state owned enterprises. This only applies to for profit enterprises where the state has ownership of greater than 50% or where information reasonably available points to the state having control over the activities of such enterprises
directors, deputy directors and members of the board, or equivalent of an international organisation:
- includes international public organisations such as the UN and NATO
- does not include international sporting federations
4.74 The definition includes family members such as spouse, partners, children (and their spouse or partner) brother, sisters and parents and known close associates, also known as politically exposed person by association.
4.75 Close associates are persons who have:
- joint legal ownership, with a politically exposed person, of a legal entity or arrangement
- any other close business relationship with a politically exposed person
- sole beneficial ownership of a legal entity or arrangement set up for the benefit of a politically exposed person
Politically exposed person’s risk
4.76 You must always apply enhanced due diligence on politically exposed persons, their family members or a known close associate of one. Guidance on how to identify such persons is set out in the section above. You must have appropriate risk management systems and procedures in place to determine whether a customer is a politically exposed person or a family member or known close associate of one. In considering your enhanced due diligence you should take account of:
- your own assessment of the risks faced by your business in relation to politically exposed persons
- a case by case assessment of the risk posed by a relationship with a politically exposed person
- any information provided through the National Risk Assessment or HMRC
Information is available in the public domain that will help you to identify politically exposed persons. You can make use of a number of sources, for example:
- ask the person
- search the internet
- news agencies and sources
- government and parliament websites
- the Electoral Commission website
- Companies House Persons of Significant Control
- Transparency International
- Global Witness
You are not required to, but you may decide to use a commercial provider to assist in identifying a politically exposed person especially if your business may be attractive to politically exposed persons.
Whatever source is used you need to understand how any database is populated, for example what data sets are used and how often it is updated. You will need to make sure that those flagged by the system fall within the definition of a politically exposed person, family member or close associate as set out in the Regulations and this guidance.
4.77 If a seller or buyer is a politically exposed person, family member or known close associate of one, then you must put in place the following measures in addition to carrying out enhanced customer due diligence:
- obtain senior management approval before establishing a business relationship with that person
- take adequate steps to establish the source of wealth and source of funds that are involved in the proposed business relationship or transaction
More frequent and thorough measures should be taken if the politically exposed person is higher risk.
4.78 You must, however, assess in each case the level of risk that the politically exposed person presents and apply an appropriate level of enhanced due diligence. More frequent and thorough measures should be taken if the politically exposed person is higher risk.
Similarly, a reduced level of enhanced due diligence measures can be applied to lower-risk politically exposed persons. A politically exposed person who has a prominent public function in the UK should be treated as lower risk unless other factors in your risk assessment indicate a higher risk. The same treatment should be applied to family members or close associates of lower risk UK politically exposed persons.
4.79 You must continue to apply enhanced due diligence when the politically exposed person has left their function or position and for a further period of at least 12 months after they cease to hold such a function. Any extension over 12 months will normally only apply to a politically exposed person you have assessed as higher risk.
As set out above, UK PEPs should be treated as lower risk unless specific factors indicate otherwise, and so you should typically cease applying enhanced due diligence measures to such persons 12 months after they cease to hold a prominent public function.
4.80 The level of risk of a politically exposed person may vary depending on where they are from and the public accountability they are subject to. The following are examples only.
4.81 A lower risk politically exposed person may be one who holds office in a country with traits such as:
- low levels of corruption
- political stability and free and fair elections
- strong state institutions where accountability is normal
- credible anti-money laundering measures
- a free press with a track record for probing official misconduct
- an independent judiciary and a criminal justice system free from political interference
- a track record for investigating political corruption and taking action against wrongdoers
- strong traditions of audit within the public sector
- legal protections for whistle blowers
- well-developed registries for ownership of land, companies and equities
4.82 A politically exposed person may be a lower risk if they, for example:
- are subject to rigorous disclosure requirements such as registers of interests or independent oversight of expenses
- do not have decision making responsibility such as a government MP with no ministerial responsibility or an opposition MP
4.83 A high risk politically exposed person may be from, or connected to, a country viewed as having a higher risk of corruption that may have with traits such as:
- high levels of corruption
- political instability
- weak state institutions
- weak anti-money laundering measures
- armed conflict
- non-democratic forms of government
- widespread organised criminality or illicit drug supply
- a political economy dominated by a small number of people or entities with close links to the state
- lacking a free press and where legal or other measures constrain journalistic investigation
- a criminal justice system vulnerable to political interference
- lacking expertise and skills related to book-keeping, accountancy and audit, particularly in the public sector
- law and culture hostile to the interests of whistle blowers
- weaknesses in the transparency of registries of ownership for companies, land and equities
- human rights abuses
4.84 A high risk politically exposed person may show characteristics such as:
- lifestyle or wealth does not match what you know of their income source
- credible allegations of financial misconduct have been made in relation to bribery or dishonesty
- there is evidence they have sought to hide the nature of their financial situation
- has responsibility for or can influence the awarding of large procurement contracts where the process lacks transparency
- has responsibility for or can influence the allocation of government grant of licenses such as energy, mining or permission for major construction projects
4.85 A family member or close associate of a politically exposed person may pose a lower risk if they are:
- related or associated with a politically exposed person who poses a lower risk
- related or associated with a politically exposed person who is no longer in office
- under 18 years of age
4.86 The family and close associates of a politically exposed person may pose a higher risk if they:
- have wealth derived from the granting of government licences or contracts such as energy, mining or permission for major construction projects
- have wealth derived from preferential access to the privatisation of former state assets
- have wealth derived from commerce in industry sectors associated with high-barriers to entry or a lack of competition, particularly where these barriers stem from law, regulation or other government policy
- have wealth or lifestyle inconsistent with known legitimate sources of income or wealth
- are subject to credible allegations of financial misconduct made in relation to bribery or dishonesty
- hold an appointment to a public office that appears inconsistent with personal merit
Where you have assessed a politically exposed person as a higher risk it may be appropriate to consider a wider circle of family members, such as aunts or uncles, as part of your risk assessment.
4.87 You must always apply enhanced due diligence to politically exposed persons, their family members and close associates. However, where your risk assessment indicates a lower risk, the politically exposed person, family member and close associates may be subject to less scrutiny than those who present a higher risk, for example:
- supervision of the business relationship is at a less senior management level
- source of wealth and funds has been established from information you already have or publicly available information only
- ongoing monitoring is less intensive such as only when necessary to update due diligence information
4.88 You should identify when a politically exposed person is a beneficial owner of a corporate body and take appropriate measures based on your risk assessment. This does not make the legal entity or other beneficial owners politically exposed persons as well. If the politically exposed person has significant control and can use their own funds through the entity then a higher risk is indicated and enhanced due diligence may be required.
4.89 As part of your customer due diligence measures, you must identify individuals by obtaining a private individual’s given and family name, date of birth and residential address as a minimum.
Supporting documentation for proof of identity may come from a number of sources. These documents differ in their integrity, reliability and independence. Some are issued after due diligence on an individual’s identity has been undertaken; others are issued on request, without any such checks being carried out. There is a broad hierarchy of documents:
- certain documents issued by government departments and agencies, or by a court; then
- certain documents issued by other public sector bodies or local authorities; then
- certain documents issued by regulated firms in the financial services sector; then
- those issued by other firms subject to the Regulations, or to equivalent legislation; then
- those issued by other organisations
4.90 You should verify the identity using identity evidence that has been issued by a recognised body, for example a Government department, that has secure identity proofing measures, and includes security features that prevent tampering, counterfeiting and forgery with the customer’s full name and photo, with a customer’s date of birth or residential address such as:
- a valid passport
- a valid photo card driving licence (full or provisional)
- a national identity card
- a firearms certificate
- an identity card issued by the Electoral Office for Northern Ireland
4.91 When verifying the identity of a customer using documents you must take a copy and keep it in the customer’s file. However it may be appropriate to also record the details of what identity evidence was presented and the information that was on the document, as well as how this evidence was checked and the outcome of the verification process.
Documents issued by official bodies such as Government departments are independent of the customer, even if provided by the customer.
4.92 Where the person does not have one of the above documents you may wish to ask for the following:
a valid and genuine identity document from a recognised and authoritative source, such as a government issued document (without a photo) which includes the person’s full name and also secondary evidence of the person’s address, for example an old style driving licence or recent evidence of entitlement to state or local authority funded benefit such as housing benefit, council tax benefit, pension, tax credit
secondary evidence of the customer’s address, that can be verified as true by an authoritative source, commonly by confirmation of a reference number, name and address, for example a utility bill, bank, building society or credit union statement or a most recent mortgage statement
4.93 You should check the documents to satisfy yourself of the person’s identity. This may include, but is not limited to checking:
- validity (see below)
- photo likeness
- whether addresses match
- whether there are anomalies in the documents that suggest they are forgeries or fakes
4.94 More information on official documents and how to spot counterfeits and forgeries is published by the Home Office in their ‘Basic Guide to Forgery Awareness’ and guidance on examining identity documents
The Nominated Officer, or other responsible person, must be aware of the issues within this and cascade relevant parts to staff as part of their training programme.
4.95 If you verify the seller or buyer’s identity by documents, you must see the originals and not accept photocopies unless certified (see Certification) as described below:
- photocopied identity documents can be accepted as evidence provided that each copy document has an original certification by an appropriate person to confirm that it is a true copy and the person is who they say they are
- for standard customer due diligence an appropriate person to certify is, for example, a bank, financial institution, solicitor or notary The person should be competent at document inspection and impostor detection
The documents must be from a reliable source not connected to the customer.
4.96 If a member of staff has visited an individual at their home address, a record of the visit may corroborate the individual’s residential address (for the purposes of a second document). How and when this may be done must be covered in the risk assessment.
4.97 Where an agent, representative or any other person acts on behalf of the seller or buyer you must make sure that they are authorised to do so, identify them and confirm their identity using documents from a reliable and independent source.
4.98 Where a person acts under a power of attorney they are a customer, as well as the donor (or grantor). Where the donor has lost mental capacity his identity should be verified as a beneficial owner. You must verify that they have the power to act in this role as well as carry out appropriate customer due diligence.
Persons without standard documents
4.99 Some persons such as elderly persons or those that cannot manage their own affairs may not be able to produce current standard documents because they have been incapacitated or have not driven or travelled for some time and have allowed licences and passports to lapse.
4.100 Before accepting non-standard documents you must exhaust the traditional forms of identification first.
The types of documents that you could accept should be from a reliable and independent source that has knowledge of the person, for example documents from:
- a medical professional
- a legal professional
- the head of a care home with relevant professional qualifications
- a pension provider stating that the person is in receipt of a pension
If non-standard documentation is used to confirm the client’s identity, measures should be taken to establish whether the documentation is genuine - for example, the use of document references or organisation stamps.
The JMLSG Guidance for the UK financial sector Part I, at the section ‘Customers who cannot provide the standard evidence’ (from 5.3.108) gives more detail on situations where non-standard documents may be acceptable.
4.101 Simply carrying out electronic records checks on limited information, such as the name and address of a person you have not seen, does not mean that you have verified that the person you are dealing with is who they say they are.
You must make sure that the checks you use show that you have identified the customer, confirmed the identity and that they are, in fact, the same person that is using your services (to protect against impersonation). You should therefore verify main confidential facts that only the customer may know to establish who they say they are. For example, testing the person using strong information that is not known to be, or likely to be, in the public domain.
Manual identity documents can be checked alongside electronic verification where greater risk is indicated. An electronic records check is not always appropriate. For example, the Council for Mortgage Lenders notes that electronic verification products may not be suitable for fraud prevention purposes.
4.102 If you verify an individual’s identity electronically, you must:
- use a package which addresses the risks detailed in your risk assessment and understand how it addresses those risks
- use multiple positive information sources, such as addresses or bill payment
- use negative sources, such as databases identifying identify fraud and deceased persons
- use data from multiple origins collected over a period of time
- incorporate checks that assess the strength of the information supplied
- make sure that the system is set to fail a customer at a level appropriate to the risk posed by the customer you are carrying out customer due diligence on
The extent of the checks should satisfy the level of risk established in your risk assessment. It is not sufficient to maintain, for example, that the electronic outsourcing provider has stated it meets your needs or the requirements of the Regulations.
4.103 Viewing a photo document over the internet or a ‘selfie’ of a person holding identification documents or the use of Skype or similar, is not an appropriate form of customer due diligence as you will not be able to identify fakes or forgeries. The use of facial recognition software does not address this issue.
4.104 If using a service provider you should make sure that it is reliable and accurate using extensive source data. You should consider the following criteria in your selection:
- it is registered with the Information Commissioner’s Office to store personal data
- it is accredited to give identity verification services through a government, industry or trade association process that involves meeting minimum standards
- the standards it works to, or accreditation, require its information to be kept up to date
- its compliance with the standards are assessed
- it uses a range of positive information sources, and links a person, through other sources, to both current and previous circumstances
- it uses negative information sources, such as databases relating to identity fraud and deceased persons
- it uses a wide range of alert sources, such as up to date financial sanctions information
- it has transparent processes that enable the firm to know what checks were carried out, what the results of these checks were
- it can set the level of certainty as to the identity of the subject suitable for your risk assessment
- should be able to keep records of the information used to verify identity information or allow a download to be stored on your own server
- if your customer due diligence records are kept on the outsourcing service provider’s server make sure that in the event of the service provider going out of business that you will continue to have access to the data for 5 years from the end of your business relationship with the customer
Individuals not resident in the UK
4.105 You should obtain the same types of identity documents for non UK residents as for UK residents.
If you have concerns that an identity document might not be genuine, contact the relevant embassy or see Public Register of Authentic travel and identity Documents (PRADO).
If documents are in a foreign language, you must satisfy yourself that they do in fact provide evidence of the seller or buyer’s identity. HMRC may require certified translations when inspecting your customer due diligence records.
4.106 For corporate entities, partnerships, trusts, charities and sole traders, you must obtain and verify identity information that is relevant to that entity. This includes the:
- full name of the company
- company or other registration number
- registered address and principal place of business
- the trust deed (in trust cases). This must be obtained in such cases
4.107 Where the customer is a trustee acting on behalf of a trust, you must identify and verify the identity of the trustees, and assess – and where appropriate obtain information on – the purpose and intended nature of the business relationship or occasional transaction. You should also identify and verify confirm the identity of the settlor, and identify or verify the identity of other beneficial owners of the trust on a risk-sensitive basis, and in accordance with your assessment of the risk associated with the customer relationship.
You should also identify and confirm the identity of both the settlor and the other beneficial owners of the trust on a risk-sensitive basis, and in line with your assessment of the risk associated with the customer relationship.
4.108 For private or unlisted companies you must take reasonable steps to obtain and verify the:
- country of incorporation and laws it is subject to (from Articles of Association or an equivalent document)
- names of the members of management body, or if none, its equivalent and the name of the senior person responsible for the company
It will also be necessary to establish the names of all directors (or equivalent) the ultimate beneficial owners and the names of individuals who own or control over 25% of its shares or voting rights - or the names of any individuals who otherwise exercise control over the management of the company.
You must look through the ownership structure of any companies or trusts to establish the ultimate beneficial owners.
4.109 Beneficial owner’s identity may be found through, for example:
- searching for Persons of Significant Control (PSC) at the Companies House register
- company website searches
- enquiries of or requesting information from the company
- public records in the UK and overseas
You do not satisfy your obligation duty to verify the identity of beneficial owners by relying only on information contained in held on a PSC register.
You do not meet your need to confirm the identity of beneficial owners by relying only on information held on a PSC register.
You cannot rely only on the information held on the PSC register to confirm the identity of beneficial owners.
4.110 You must verify the identity through reliable, independent sources that are relevant to that type of entity. For example:
- searching a relevant company registry
- obtaining a copy of the company’s certificate of incorporation
4.111 Where an individual claims to act on behalf of a seller or buyer, you must also obtain evidence that the individual has the authority to act for them, identify the individual and verify their identity. Evidence that the individual has the authority to act may be through:
- a call to the customer with a confirmation email by return
- legal documents
- Companies House information showing a connection or third party confirmation
Obligation of customers to provide information
4.112 Where you cannot verify identities through reliable independent sources it may be obtained from the company itself if your risk assessment allows for this. Corporate bodies in the UK, who are not listed on a regulated market, have obligations to keep a register of people with significant control (a PSC register) and must give this information when requested.
When a corporate person enters into a transaction with an estate agency business you can ask that they give you the following information:
- name, registered number, registered office and principal place of business
- names of the board of directors or equivalent body
- names of the senior person responsible for its operations
- the law to which it is subject
- their legal and beneficial owners
- their memorandum of association or similar documents
4.113 Guidance on the requirements to maintain PSC registers will help in identifying beneficial owners but it will not give you all the information you need to verify their identity, for example, the address or date of birth of the individual.
4.114 Trustees have similar obligations to tell you that they are acting as a trustee, to identify all of the beneficial owners of the trust and any other person that may benefit.
4.115 The corporate person and trustee must notify you of any changes to the information supplied.
4.116 You must identify the existence of any beneficial owners (the section on customer due diligence gives information on who is a beneficial owner). You must take reasonable measures to verify the beneficial owner’s identity so that you are satisfied that you know who the beneficial owner is. If it is a legal person, trust, company, foundation or similar legal arrangement you must take reasonable measures to identify and verify the ownership structure and look through the structures until you reach individuals who are the ultimate beneficial owners.
4.117 You will not have met your obligation to identify, verify and understand the structure of a beneficial ownership if you rely solely on the information contained in a register of persons with significant control.
4.118 Where a seller or buyer is incorporated and where you have made unsuccessful attempts, and have exhausted all ways, to identify the beneficial owner of a corporate body you may treat the most senior person managing the customer as the beneficial owner. For example, a company may not have an ultimate beneficial owner due to the number of shareholders.
You must keep written records that are clear and show all the steps taken to identify the beneficial owners, the progress improvements made and why they have been unsuccessful and consider whether they should be treated as a higher risk or even suspicious due to the number of entity layers.
4.119 It is common for property to be jointly owned by more than one individual. You must identify any co-owners, who are not your customers, as these will be beneficial owners. The customer you are dealing with may be either an owner or acting for the owners. You will need to carry out customer due diligence on the owners and any person acting on behalf of the owners. Ownership can be established through the Land Registry.
Reliance on third parties
4.120 You must do customer due diligence before entering into a business relationship with a seller or buyer. As estate agency businesses are usually the first professional to be instructed and because of this they are usually unable to rely on a third party, such as a solicitor, bank or building society to carry out customer due diligence as these professionals are not employed until the business relationship has progressed improved.
4.121 You can rely on the following persons to apply customer due diligence for you before entering into a business relationship with a seller or buyer:
- another UK business subject to the Regulations including another estate agency business
- a business in the European Economic Area (EEA) who is subject to the 4th Money Laundering Directive
- a branch or subsidiary established in a high risk third country who fully complies with an EEA parent’s procedures and policies
- a business in a third country who is subject to equivalent measures
4.122 The third party must agree that you will rely on them. The agreement must include arrangements to:
- give you details of the customer due diligence they hold so that you know it meets your risk requirements
- obtain immediately copies of the customer due diligence information from the third party on request
- make sure the third party retains copies of the due diligence information for 5 years from the date on which the transaction occurs or your business relationship with the customer ends
4.123 If you rely on a third party you will remain responsible for any failure to apply due diligence measures appropriately. This is particularly important when relying on a person outside the UK. It may not always be appropriate to rely on another person to undertake your customer due diligence checks and you should consider reliance as a risk in itself.
4.124 When you rely on a third party to undertake customer due diligence checks, you will still need to do your own risk assessment of the seller and buyer and the transaction and you must still carry on monitoring the business relationship.
4.125 Reliance can only be on the customer due diligence carried out by another supervised business in order to meet their own requirements under the Regulations.
It does not include accepting information from others to verify a person’s identity for your own customer due diligence needs such as getting a certified copy of a document, nor electronic verification which constitutes outsourcing a service. Within outsourcing arrangements, you still remain responsible for any failure to apply due diligence measures appropriately.
4.126 You must not rely on simplified due diligence carried out by a third party or any other exceptional form of verification, such as where the source of funds has been used as evidence of identity.
4.127 Sub agents can rely on the customer due diligence carried out by principal agents if it meets the conditions above.
5. Reporting suspicious activity
5.1 Minimum requirements:
- staff must raise an internal report where they know or suspect, or where there are reasonable grounds for having knowledge or suspicion, that another person is engaged in money laundering, or that a terrorist finance offence may be committed
- the business’s nominated officer (or their appointed alternate) must consider all internal reports. The nominated officer must make a report to the National Crime Agency (NCA) as soon as it is practical to do so, even if no transaction takes place, if they consider that there is knowledge, suspicion or reasonable grounds for knowledge or suspicion, that another person is engaged in money laundering, or financing terrorism
- the business must consider whether it needs to seek a defence against money laundering or terrorist financing offences (DAML) (formerly known as a consent SAR) from the NCA before proceeding with a suspicious transaction or entering into arrangements
- It is a criminal offence for anyone to do or say anything that ‘tips off’ another person that a disclosure has been made where the tip-off is likely to prejudice any investigation that might take place
5.2 Actions required:
- enquiries made in respect of internal reports must be recorded
- the reasons why a report was, or was not, submitted should be recorded
- a record of any communications to or from the NCA (or other relevant authorities) about a suspicious activity report should be kept
Suspicious activity reports (SAR)
5.3 This is the name given to a report sent to the NCA under the Proceeds of Crime Act or the Terrorism Act. The report identifies individuals or entities who you, or an employee, know, suspect, or have reasonable grounds to know or suspect, may be involved in laundering money or financing terrorism.
5.4 Having knowledge means actually knowing something to be true. In a criminal court, it must be proved that the individual in fact knew that a person was engaged in money laundering. That said, knowledge can be inferred from surrounding circumstances.
5.5 The term suspicion is more subjective and falls short of proof based on firm evidence. Suspicion has been defined by the courts as being beyond mere speculation and on some based foundation.
5.6 Reasonable grounds for suspecting are likely to depend upon particular circumstances and the member of staff should take into account such factors as the nature or origin of the transaction, how the funds, cash or assets were discovered, the amounts or values involved, their intended movement and destination, how the funds cash or assets came into the customer’s possession, whether either the customers or the owners, or both, of the cash or assets (if different) appear to have any links with either criminals or criminality, terrorists, terrorist groups or sympathisers, whether in the UK or overseas.
5.7 The suspicion is that the funds or property involved in the transaction is the proceeds of any crime or of corruption or is linked to terrorist activity. You do not have to know what sort of crime they may have committed, but one or more warning signs of money laundering, which cannot be explained by the seller, a colleague or any counterparty involved in the business relationship or transaction, will be relevant.
5.8 As an estate agency business in the regulated sector, you are also required to make a Suspicious Activity Report (SAR) as soon as possible after you know or suspect that money laundering or terrorist financing is happening. This means that the facts you have about the seller and buyer and the transaction would cause a reasonable property professional in your position to have a suspicion.
There is guidance about submitting a SAR within the regulated sector in the ‘How to report SARs’ section of the NCA website. The NCA document ‘Guidance on submitting better quality SARs’ takes you through the information you should provide and the SAR glossary codes you should use.
5.9 You can submit a suspicious activity report to the NCA by registering with the NCA online. The NCA gives information and registration details online and the NCA prefers this method. The system does not retain a file copy for your use, so you may wish to keep a copy of your report but this must be securely kept. This system lets you:
- register your business and contact persons
- receive a welcome pack with advice and contact details
- submit a report at any time of day
- receive email confirmation of each report
5.10 The NCA also issues report forms for you to fill in manually but you will not receive an acknowledgement of a report sent this way. For help in submitting a report or with online reporting to the NCA contact the UK Financial Intelligence Unit (UK FIU) helpdesk:
- Defence Against Money Laundering (DAML) Enquiries. All contact with the UKFIU DAML Team is by email: DAML@nca.x.gov.uk
- queries about either SAR Online or general enquiries telephone: 0207 238 8282 or email: firstname.lastname@example.org
5.11 Submitting a request for a DAML to the NCA, whether you are granted a defence, or not, does not replace the requirement on the business to complete customer due diligence before entering into a business relationship (see Defence SAR below).
5.12 It is important that you have detailed policies, controls and procedures on internal reporting and the role of the nominated officer (see nominated officer below).
5.13 You must provide regular training for your staff in what suspicious activity may look like in your business and you should keep records of that training, who has received it and when. The nominated officer must be conversant with guidance on how to submit a report and in particular be aware of the codes detailed in the glossary that must be used in each report.
5.14 A suspicious activity report must be made to the NCA no matter what part of your business the suspicion arises in.
5.15 The tests for making a report about terrorist financing are similar. You must make a report if you know, suspect or had reasonable grounds for knowing or suspecting that another person committed or attempted to commit a terrorist financing offence.
5.16 You must appoint a nominated officer to make reports (see suspicious activity reports) from within your registered business. The nominated officer (or a deputy) must make a report if they know or suspect that someone is involved in money laundering or terrorist financing.
5.17 Staff must report to the nominated officer as soon as possible if they know or suspect that someone, not necessarily the seller or buyer, is involved in money laundering or terrorist financing. The nominated officer will then decide whether to make a report.
5.18 A sole trader with no employees does not need to appoint a nominated officer as they are the nominated officer by default.
5.19 The nominated officer should make a suspicious activity report even if no transaction takes place. The report should include details of how they know about, or suspect money laundering or terrorist financing. It should also include as much relevant information about the seller and buyer, transaction or activity as the business has on its records.
5.20 If a report is made before a transaction is completed or the start of a business relationship, you must ask for a defence to a money laundering or terrorist financing offence from the NCA to go ahead with the transaction.
5.21 Where the nominated officer makes a conscious decision not to file a report to the NCA, they should document their rationale. This will help with any future prosecution for failing to report.
Defence against money laundering (DAML)
5.22 If you wish to go ahead with the transaction or start a business relationship with the customer who you have made a report about, then you must ask for permission from the NCA to progress the transaction. This permission, if granted, will constitute a defence (DAML) to a money laundering or terrorist financing offence.
This was previously known as a Consent SAR and the consent needs to be given by the NCA. It is only when the consent is given that it provides you with a defence against a charge in relation to money laundering or terrorist financing offences.
5.23 You should tick the ‘consent requested’ box on the form. See the guidance Requesting a defence from the NCA under POCA and TACT.
5.24 The NCA has also produced good practice guidance and frequently asked questions to help you to produce good quality DAML SARs, ‘Defence Against Money Laundering (DAML) FAQ’.
5.25 It is an offence for the nominated officer to allow a transaction to proceed prior to receiving a granted letter from the NCA within the 7 working day statutory time period. This period starts from the day after submitting the report.
5.26 A DAML relates to the principle offences in Proceeds of Crime Act (s327 to 329) and the Terrorism Act (s15-18) but not to other criminal offences.
5.27 A DAML does not provide derogation from, or replace, a reporter’s professional duties of conduct or regulatory requirements, such as those under the Regulations concerning, for example, customer due diligence.
5.28 If you do not receive a refusal notification from the NCA within the notice period it is up to you to interpret your position and you may, if you consider that you have met the requirements for making a disclosure, assume a defence at the end of the notice period.
5.29 A granted response or no reply from the NCA within the notice period does not imply that the NCA approve of the proposed acts, persons, corporate entities or circumstances contained within the disclosure, nor does it oblige or mandate a reporter to undertake the proposed act.
5.30 If the NCA refuses you a defence, you must not proceed with a transaction for up to a further 31 calendar days, that is, the moratorium period. It is an offence to allow the transaction to proceed during the moratorium period if consent has been refused. In terrorist financing cases the moratorium period does not apply, you do not have a defence until a request is granted.
The moratorium period can be extended, by a court, in cases where further information or evidence is required.
5.31 The NCA has published information on obtaining a defence. Some of the main points are that:
- you only receive a DAML to the extent to which you ask for it. So you should clearly provide all the information on the transaction, persons involved and provide information on what the criminal assets are, their value (or an estimate) and whereabouts. For example: ‘We seek a DAML in acting for a client (name, address and date of birth of customer) to find a property. He is residing at (full address and postcode) and wishes to purchase a residential property in Central London to a value of £xxxxxxx. He is represented by a solicitor (name and address). The funds and fees of (£xxx) may be the proceeds of crime due to the suspicions arising from the explanations given by the client that the purchase price would come from savings and an unspecified windfall and that large amounts of cash can be obtained to make sure the purchase goes smoothly. He also says he is prepared to pay over the asking price to secure a quick sale’
- you cannot ask for a general DAML to trade with a person, only to carry out a particular transaction
- if the request is urgent and you need a DAML sooner, you should clearly state the reasons for the urgency and perhaps contact the NCA to discuss the situation
- the NCA will confirm their decision in writing
5.32 Requesting a DAML can only apply where there is prior notice to the NCA of the transaction or activity. The NCA cannot provide consent after the transaction or activity has occurred.
The receipt of a SAR after the transaction or activity has taken place will be dealt with as an ordinary standard SAR, and in the absence of any instruction to the contrary, a business will be able to provide services to the customer until such time as the NCA determines otherwise through its investigation.
5.33 Care should be taken that the requirement to obtain consent for a particular transaction does not lead to the unnecessary freezing of a customer’s account, thus affecting other, non-suspicious transactions.
5.34 It is a criminal offence for anyone to say or do anything that may prejudice an investigation or ‘tip off’ another person that a suspicion has been raised, a SAR has been submitted or that a money laundering or terrorist financing investigation may be carried out. It is also an offence to falsify, conceal or destroy documents relevant to investigations.
5.35 Nobody should tell or inform the person involved in the transaction or anyone else that:
- the transaction is being or was delayed because a suspicion has been raised
- details of a transaction have or will be reported to the NCA
- law enforcement agencies are investigating the person
Such an offence carries a penalty of up to either 5 years imprisonment or a fine, or both.
Example of when you may consider making a SAR
5.36 These are some of the factors to consider in deciding whether or not to submit a suspicious activity report when you deal with new transactions:
- checking the seller or buyers identity is difficult
- the seller or buyer is reluctant to provide details of their identity or provides documents which may be fake
- the seller or buyer is trying to use intermediaries to protect their identity or hide their involvement
- you must go through several legal entities in order to identify the beneficial owner or you are unable to identify whether there are any beneficial owners
- whether there is no apparent reason for using your business’s services - for example, another business is better placed to handle the transaction due to location or specialism
- their lifestyle does not appear to be consistent with your knowledge of their income or income does not appear to be from a legitimate source
- they vendor or buyer are keen to sell or buy quickly at an unusually low or high price for no legitimate reasons
- part or full settlement is offered in cash or foreign currency, with weak reasons
- individuals, or their associates, are subject to, for example, adverse media attention, have been disqualified as directors or have convictions for dishonesty
Regular and existing customers
5.37 These are some of the factors to consider when deciding whether or not to submit a suspicious activity report in relation to your regular and existing customers:
- the transaction is different from the normal business of the customer
- the size and frequency of the transaction is different from the customer’s normal pattern
- the pattern has changed since the business relationship was established
- the nature of any payments made changes, for example, a buyer’s payment to an auctioneer is made in cash rather than through a bank account
- there has been a significant or unexpected improvement in the customer’s financial position the customer cannot give a proper explanation of where money came from or their source of wealth or funds
5.38 These are some of the factors to consider when deciding whether or not to submit a suspicious activity report in relation to the services you carry out:
- a third party, apparently unconnected with the seller or buyer, bears the costs, or otherwise pays the transaction costs
- an unusually big cash or foreign currency transaction
- the buyer will not disclose the source of the funds or the seller the source of wealth where required
- unusual involvement of third parties, or large payments from private funds, particularly where the buyer appears to have a low income
- unusual source of funds
6. Record keeping
6.1 You must retain:
- a copy of your customer contract and of the purchase or sale
- copies of the evidence obtained to satisfy customer due diligence and details of seller and buyer’s transactions for 5 years after the end of the business relationship
- a copy of your agreement with any customer due diligence outsourcing service provider
- details of transactions for 5 years from the date of the transaction
- details of actions taken in respect of internal and external suspicion reports
- details of information considered by the nominated officer in respect of an internal report, where the nominated officer does not make a suspicious activity report
- copies of the evidence obtained if you are relied on by another person to carry out customer due diligence, for 5 years from the date that the third party’s relationship with the customer ends, the agreement should be in writing
- details of the customer due diligence held by another supervised business on which you are relying
6.2 You must also maintain a written record of:
- your risk assessment
- your policies, controls and procedure
- internal audits of your procedures
- a written record of the what you have done to make staff aware of the money laundering and terrorist financing legislation and related data protection requirements, as well as the training given to staff
6.3 You must keep records of customer due diligence checks and business transactions:
- for 5 years after the end of the business relationship
- for 5 years from the date an occasional transaction was completed
- you should also keep supporting records for 5 years after the end of a business relationship
6.4 The records should be reviewed periodically to make sure that information is up to date where, for example, a change of ownership has occurred. This review need only include ongoing relationships.
6.5 You are not required to keep customer transaction records that are part of a business relationship for more than 10 years, where a business relationship is ongoing.
6.6 After the period above any personal data obtained for the purposes of the Regulations must be deleted unless you are required to keep them in relation to legal or court proceedings or any other legislation, or the data subject has given consent to the retention of the data.
6.7 You can keep records as original documents and photocopies of original documents in either hard copy or electronic form. Copies must be clear and legible. The aim is to make sure that the business meets its obligations and, if requested, can show how it has done so.
This evidence may be used in court proceedings.
6.8 If someone else carries out customer due diligence for you, you must make sure that they also comply with these record keeping requirements. You must be able to demonstrate that records of customer due diligence checks carried out by an outsourcing service, and which are stored on their server, will be available to you should you wish to move to another service or should that service go into liquidation.
6.9 All electronic records must be subject to regular and routine backup with off-site storage.
7. Staff awareness
7.1 You must:
- make sure relevant staff are aware of the risks of money laundering and terrorist financing, the relevant legislation, and their obligations under that legislation, know who the nominated officer is and what their responsibilities are, trained in the firm’s procedures and in how to recognise and deal with potential money laundering or terrorist financing transactions or activity
- train staff at regular intervals
- maintain a written record of what you have done to raise awareness of the law and the training given to staff
- make sure that a relevant director or senior manager has overall responsibility for establishing and maintaining effective training arrangements
Larger and more complex businesses must:
- screen relevant staff before they take up post to assess that they are effective in carrying out their function and are of good conduct and integrity
Minimum actions required
You should make sure that your business addresses each of the following points, and keep the extent to which these points are satisfied under regular review:
- provide appropriate training to make relevant staff aware of money laundering and terrorist financing legislation and issues, including how these crimes operate and how they might take place through the business
- make sure that relevant employees have information on, and understand, the responsibilities and legal obligations of the business under this legislation - individual members of staff, for example, the functions of the nominated officer and any changes to these positions
- regularly communicate your risk assessment, policy, control and procedures information within the business and with branches and subsidiaries
- regularly give training to relevant staff in how to recognise and deal with transactions and other activities or situations which may be related to money laundering or terrorist financing. Consider providing staff with case studies and examples related to the firm’s business to illustrate where risks of money laundering and terrorist financing are most likely to arise
- train relevant staff in how to operate a risk based approach to assessing the risks of money laundering and terrorist financing
- where appropriate for a larger and more complex business, set up a system to screen staff before they take up the post and refresh the screening at intervals
- keep records of training given
7.2 Your staff are the best defence against individuals who could be involved in money laundering and terrorist financing who may try to abuse the services provided by your business.
7.3 You must take steps including:
- telling your staff about your anti-money laundering and counter terrorism financing obligations
- giving them suitable (risk based) training on their legal obligations
- telling them how to identify and deal with the risks
- making them aware of data protection obligations
- making them aware about how to effectively verify the identity of individuals
If you do not do this and your staff do not know what is required, then you and your business may be open to penalties or criminal charges.
Relevant staff are persons involved in the identification of risk, your policies, controls and procedures to reduce risk and your compliance with the Regulations.
7.4 When you consider who needs to be trained you must include relevant staff who deal with your customers, deal with money or help with compliance. Think about reception staff, administration staff and finance staff, because they’ll each have a different involvement in compliance, and have different training needs.
The training process should therefore cover the whole end to end process from sales and receiving customers’ instructions, through to market appraisal, dealing with offers and completion.
7.5 Nominated officers, senior managers and anyone who is involved in monitoring business relationships and internal controls must also be fully familiar with the requirements of their role and understand how to meet those requirements.
7.6 Each member of staff must be ready to deal with the risks posed by their role. Their training must be appropriate to their role, and often enough, to keep their knowledge and skills up to date.
7.7 It must cover as a minimum:
- the staff member’s duties
- the risks posed to the business
- the business policies, controls and procedures
- how to conduct customer due diligence and check sellers’ and buyers’ documents where this is part of their role
- how to spot and deal with suspicious persons and activity
- document inspection and imposter detection including the Home Office guidance
- how to make internal reports, including disclosures of suspicious activity
- data protection requirements
- record keeping
- the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; Part 7 of the Proceeds of Crime Act; and sections 18 and 21A of the Terrorism Act
7.8 Training may include:
- face-to-face training
- online training sessions
- HMRC webinars
- going to conferences
- taking part in special meetings to discuss the business procedures
- reading publications
- meetings to look at the issues and risks
- trade body information
7.9 Your policy manual outlining the policies, controls and procedures the business has put in place for the purpose of preventing money laundering and terrorist financing is useful to raise staff awareness and for reference between training sessions.
Staff training is necessary when staff join the business, move to a new job or when they change roles. They should also have ongoing training at least every 2 years or when a significant change happens, for example legislation or the business’s risk assessment changes.
7.10 You must keep evidence of your assessment of training needs, training given and the steps you have taken to meet those needs. You may be asked to produce training records in court.
Training records include:
- a copy of the training materials
- details of who provided training, if provided externally
- a list of staff who have completed training, with dates, and their signatures, confirmation of their understanding of the obligations or electronic training records
- an updated training schedule
8. Estate Agency Business risk
8.1 An estate agency business in a metropolitan area with an international clientele is likely to present a different risk profile to a high street business in a small market town. However, both may be targeted by criminals if they have little or no controls in place.
The environment you do business in affects your risk assessment, for example, if you have super-prime property or if you have many high net-worth customers or deal with people from a particular country or region, this will influence the business wide assessment.
You should be aware of the risk of transactions being used for tax evasion, for example, the use of complex legal entities or the manipulation of property prices to just below a Stamp Duty threshold, perhaps by rigging the price of fixtures and fittings. You should also look closely at transactions, especially woodland or agricultural land purchases that may be intended to avoid Inheritance Tax.
8.2 Other areas of particular concern are:
- estate agency staff being offered bribes, for example in relation to valuations or planning applications
- the source of funds potentially coming from mortgage fraud by a seller or buyer or mortgage broker
- landlords not complying with their legal obligations, for example, licensing
- attempts to pay fully or partially for the purchase of a property from the proceeds of criminal activity like internet fraud, drug dealing, prostitution or human trafficking
- acceptance of disproportionate corporate hospitality
- use of a client fund account for non-property transactions or other funds handling services
- tenants attempting to sell properties they have rented or persons selling properties they do not own
Identifying suspicious activity
8.3 Identifying a seller, buyer or transaction as high risk does not automatically mean that they are involved in money laundering or terrorist financing. Similarly, identifying a person or transaction as low risk does not mean that they are not involved in money laundering or terrorist financing.
8.4 Below are some warning signs of potentially suspicious activity. These are not complete lists and these signs are not always suspicious nor will you always have direct knowledge of them. It depends on the circumstances of each case.
8.5 New or existing sellers and buyers:
- searches on a party to a transaction or associate show, for example, adverse media attention, disqualification as a director, convictions for dishonesty or association with bribery in relation to contract procurement
- seller, buyer or professionals being evasive or reluctant to provide required customer due diligence information or documentation or where ownership is said to be confidential
- checking the person’s identity is difficult
- the person is reluctant to provide details of their identity or provides fake documents
- the person is trying to use intermediaries to protect their identity or hide their involvement
- non-UK resident using intermediaries where it makes no commercial sense
- no apparent reason for using your business’s services - for example, another business is better placed to handle the size of the transaction or the location of the property
- part or full settlement in cash or foreign currency, with weak reasons
- use of cash in a quick sale, or cash exchanges directly between seller and buyer - perhaps including cash deposit
- poor explanation for the early redemption of a previous mortgage, especially where redemption incurs a penalty cost
- the customer or counterparty does not take up services that are attractive or is willing to pay fees that seem unnecessary
- the property value does not fit the customer’s profile
- the buyer has not viewed the property or has only seen it on the internet
- customers are similar - a group of purchasers with similar profiles purchases new builds or off plan can be an indicator of organised mortgage fraud
- the ownership is not transparent and uses complex trusts, offshore arrangements or multiple companies possibly involving multiple countries
- reluctance to employ a solicitor or other professional for conveyancing
8.6 How a transaction is carried out or requests made by a seller or buyer may indicate a greater risk:
- the use of multiple companies or trusts which adds layers of complexity to ownership particularly where those layers seem unnecessary, for example, trusts owning trusts or offshore shell companies
- a property has multiple owners or is owned by nominee companies
- where multiple properties are purchased, resold or exchanged
- a large cash deposit with the balance from an unusual source
- multiple payments of smaller amounts possibly through different accounts and to avoid thresholds put in place by overseas authorities
- sale price significantly above or below market price
- the use of property management or investments companies who may not trade to make ownership less transparent
- an unknown third party appears at a late stage
- unusual speed or requests to expedite transactions unnecessarily possibly over or under value
- a sudden or unexplained change in ownership
- the immediate resale (flipping) of property at a higher value
- a third party, apparently unconnected with the seller or buyer, bears the costs, settles invoices or otherwise pays the transaction costs
- the customer requests payment to a third party who has no apparent connection with the customer
- an unusually big cash or foreign currency transaction, and the buyer will not disclose the source of the funds
- unusual involvement of third parties, cash gifts, or large payments from private funds, particularly where the buyer appears to have a low income
- using multiple intermediaries or professionals to hide ownership or to arrange unusually complicated transactions
- you are asked to hold a big sum in your client account, then refund it to the same or a different account
- proceeds of a sale or rental sent to a high-risk jurisdiction or unknown third party
- successive transactions, especially of the same property, with unexplained changes in value
- unusual source of funds, for example complex loans or unexplained charges
- the owner, landlord or builder is not complying fully with their legal obligations, perhaps to save money
- a previously sold property is re-marketed following renovation without an obvious source of funding
9. Estate agents and property professionals
9.1 Anyone who engages in estate agency work must comply with the Regulations. HMRC supervise estate agency businesses under these Regulations. A business must not carry on estate agency business unless they are registered with HMRC.
9.2 The Regulations define ‘estate agent’ as a firm or sole practitioner, who or whose employees carry out estate agency work (within the meaning given by section 1 of the Estate Agents Act 1979). The Office of Fair Trading confirmed a business qualifies as an estate agent under the act, if it meets either of the requirements listed in sections 1a or 1b, it does not have to meet both1. Since 1 October 2012, the definition has included estate agents based in the UK who deal with overseas property, either exclusively or alongside other property services. It can also cover estate agency businesses based abroad if they are doing business within the UK.
9.3 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 we refer to ‘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.
Estate agency work
9.4 Under Section 1 of the Estate Agents Act 1979 estate agency work includes introducing/negotiating with people who want to buy or sell freehold or leasehold property (or their Scottish equivalents) including commercial or agricultural property (whether in the UK or abroad):
- where this is done in the course of a business
- pursuant to instructions from a customer
9.5 This definition includes:
- high street or online residential estate agency businesses
- commercial estate agency businesses
- property or land auctioneers
- land agents
- relocation agents, property finders, private acquisitions specialists
- a sub-agent providing estate agency services to a principal estate agency business
- asset management businesses that also provide estate agency services
- business brokers or transfer agents that broker the sale or transfer of client businesses to third parties
- social housing associations that offer estate agency services including the re-sale of shared ownership units
- letting or property management agents that offer estate agency services to landlord customers or who undertake the sale of leases for a premium (where the bulk of the rent is paid up front)
- construction companies (house builders) or developers to the extent that they offer estate agency services beyond the sale of their own constructed or bought units. For example, land or property may be held by one company in a group and a second within the group carries out estate agency work in respect of that land or property
- in Scotland, a solicitors’ property centre
9.6 The definition of estate agency does not apply to:
- the publication of advertising or giving out information, for example by newspapers
- an intermediary such as an internet property portal for private sales, which merely provide a platform for private sellers to advertise their properties and provide a means for sellers and buyers to contact and communicate with one another. However, this exemption applies only if you do nothing else covered by the general definition of estate agency work
- practising solicitors who carry out estate agency work as part of their role as a solicitor. However, if a solicitor has a separate business which provides estate agency services, they will fall within the definition of an estate agent and must register with HMRC
Estate agents’ employees and the Regulations
9.7 Employees of estate agents who carry out estate agency work are not themselves individually supervised by HMRC. However, their employers will be responsible for their compliance with the Regulations.
Franchise business models
9.8 Franchise business models operate in the estate agency business sector. These can vary in their operation and in terms of how control is exercised. Frequently 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.
9.9 Where a franchise agreement provides that a franchisee has substantial independence from the franchisor, can make important 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.
9.10 The same criteria will apply to local representatives of online estate agency businesses who are carrying out their activities in the course of business.
9.11 The franchisor, where it is not merely the brand holder, must also make sure that they register if they are carrying out estate agency work.
9.12 If the sub-licensees of the franchise are in fact employees of an estate agency business then their activities must be accounted for within the registration of that estate agency business. In order to obtain an indication as to whether a sub-licensee is an employee there is a self-determination tool and this is normally how people decide their status for themselves. This is, of course, dependent on the inputting of accurate information and may be subject to review by HMRC.
9.13 Should sub-licensees act as agents of the registered principle estate agency business or brand holder then the registered principle can register other premises within its registration from which the sub-licensees work if those sub-licensees are its agent.
To be an agent, the principle must have control over the work and activity of the agent when those agents are not its employees. The registered principal is then taking responsibility for the activity of the agent and in consequence the compliance of the agent and any breaches of the Regulations by the agent will attract a penalty or prosecution of the registered principal. However, it is rare that HMRC sees this scenario within this sector.
10. More information
10.1 You can contact HMRC by:
- Telephone: 0300 200 3700
10.2 Further information about the obligations set out in this guidance is available from:
Information on the role of the National Trading Standards Estate Agency Team and whether you need to join a property redress schemes is available at: