LISTEN: NAEA chief executive Mark Hayward explains what new identity check regulations will mean for agents
UK estate agents will have to check the background of all property buyers from 26 June as part of new regulations launched by the Treasury.
The increased accountability is intended to reduce money laundering in the UK property market, which according to the Serious Fraud Office amounts to £35bn a year, and could have substantial implications for the sale of property in both the UK and overseas markets.
The new regulations were launched as part of the Fourth Money Laundering Directive, which was first put out for consultation in September last year. Its function was to make sure the UK’s anti-money laundering and counter-terrorist financing regime is up to date and effective.
The consultation stated: “Estate agents act as a key facilitator of the transaction and may be the only regulated professional whom the buyer encounters when purchasing a property.
“The government will clarify that for the purposes of the regulations, an estate agent is to be considered as entering into a business relationship with a purchaser as well with as a seller. This means that estate agency businesses must apply client due diligence to both contracting parties in a transaction.”
The estate agency view
The buyer regulations were expected and welcomed by the majority of UK estate agents.
Nick Hayward, chief executive of the National Association of Estate Agents, says it had been consulting with the government for some time, and that regulations to improve transparency and confidence in the market were welcome.
“The implications are the good guys will continue to be good, and the larger agents are already diligent. But it’s going to be an education process of making buyers aware this is going to have to happen,” he said.
At the moment, due diligence checks revolve around ensuring sellers are who they say they are to prevent money laundering. Estates agents are required to see proof of address and identity, while other checks will look into sources of funds.
Under the Proceeds of Crime Act, agents are already required to inform authorities if they have any suspicions about the money used in a transaction.
What’s next
Hayward said that the new regulations were still lacking clarity. Specific questions include:
■ when is a buyer a buyer, and at what point in the acquisition process checks need to be performed?
■ what will be required in the checks, and will the same due diligence be required on buyers as sellers?
■ how will the new rules work with companies that are buying properties?
■ how will the process work for property auctions, and will potential buyers will have to be registered in advance?
Hayward also said that in prime central London, where the heat has gone out of the market and agents are very keen to do deals, there are questions about the how diligent agents could be if it puts people off deals.
There was also some disappointment that letting agents have not been included in the regulations.
David Cox, ARLA Propertymark chief executive, said: “We’re disappointed the government has chosen not to include letting activity within the money laundering regulations 2017. The risk with this is that money laundering activity will transfer from the sales sector, owing to the increased powers within the new regulation, into the lettings sector, which remains unregulated.”
Beneficial ownership
The government will continue to require reporting of beneficial ownership, which aims to make clear who the ultimate owner of an asset is, say the regulations. This was largely in response to the scandal around overseas ownership of London properties revealed in the Panama Papers last tear.
The regulations state: “Article 31 requires the trustees of any express trust to hold adequate, accurate and up-to-date information on the beneficial ownership of their trust. They must make this information available to law enforcement and the UK Financial Intelligence Unit.”
For the moment there is no mention specifically of the register, which has been delayed by the upheavals of the referendum, but the Treasury still intends to create the register of all property bought and sold going forwards in the UK, and by whom it is eventually owned.
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