15 Jan The 5th Anti-Money Laundering Directive: Everything Real Estate Firms Need to Know
The EU’s 5th Anti Money Laundering Directive (5AMLD), came into force on 10 January 2020. The legislation tightens regulatory controls across many sectors (including Crypto currency sector!), and this year, has been extended to include London Real Estate Firms, real estate brokers, estate agents and rental intermediaries.
It’s important for all UK real estate companies, who provide real estate services on the residential and commercial side, understand how to fully comply with the upgraded Anti Money Laundering (AML) legislation. Failure to do so can result in severe penalties and even criminal prosecution being taken against you.
What do the changes mean for letting agents?
In order to fully protect yourself, your business and your investments, there are 2 main changes you should be aware of.
- Property Brokers, Commercial and Estate Agents renting out residential or commercial properties for more than €10,000 (£8,500.00 equivalent) per calendar month, are now considered within AML’s scope.
- Agents and brokers must comply with the law and conduct proper due diligence on landlord, tenant, guarantor and/or authorised occupier.
Although the extent and application of these new rules is UK wide, only those letting agents and property brokers that fall within the scope of the threshold will need to register for AML supervision and immediately comply.
What do I need to know about the registration process?
All letting agents should register with HMRC, and have 12 months from the 10th January 2020, in order to do so. It now costs £300.00 for each registered premise, as well as the ‘fit and proper test’ fee, and an approval process fee for each person tested, as part of the new anti-money laundering policy.
It is worth noting that although HMRC’s online register will not be fully operational until May 2020, Property Brokers, Commercial and Estate Agents will be expected to comply with anti-money laundering regulations from the 10th January 2020.
Customer Due Diligence (CDD) checks will need to be carried out on any new tenants and landlords from the 10th January, as part of the new anti-money laundering process.
What is a CDD check?
Customer Due Diligence checks and measures must be in place for all customers for any tenancy agreement with a monthly calendar rent of €10,000 (£8,500.00 equivalent) or more, for the transaction to proceed.
This means identifying and verifying the customer’s identity, obtaining information on the company and the director’s, nature of the business relationship, identify the proceed of funds, and details of any beneficial owners at the point at which the tenant’s offer is accepted, as well as before the tenancy agreement is signed and accepted.
Customers include vendor, buyer, landlord, tenant, authorised occupier, guarantor and any other relevant parties to the transaction.
How else can I make sure I’m fully compliant?
Here are changes and procedures you now need to have in place, in order to be compliant with 5AMLD;
- Letting agents must take appropriate steps to identify and assess the risks of money laundering and terrorist financing. To do this, an up to date risk assessment and policy on managing risk must be established and maintained.
- Each business requires a Nominated Money Laundering Reporting Officer (MLRO), who is responsible for the letting agency business’ compliance with the MLR.
- Regular training opportunities in how to recognise and deal with transactions which may be related to money laundering and terrorist financing, must be provided to all employees.
- Copies of CDD and supporting records must be kept for up to five years.
- If you have reasonable grounds to suspect suspicious activity, you should notify the nominated officer immediately through a written internal report. The letting agency must then complete a Suspicious Activity Report (SARs) and send to the National Crime Agency.
Would you like more information about the updated anti money laundering act?
A good place to start is the European Commission website. You can click here for more details on 5AMLD.
The process is also outlined in the rules, Anti-Money Laundering Regulations section of our website. You can click here for more details on anti-money laundering checks.
Should you require further assistance, call and speak with the Stonelink International property broker uk team direct on + 44 (0) 207 993 4081 or contact us for a fast response.