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EXCLUSIVE: Agents will have to undergo criminal checks under new Money Laundering regime

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Estate agents will have to undergo – and almost certainly have to pay for it themselves – criminal record checks in order to stay in business.

The new requirement falls under the new Money Laundering Regulations regime, which starts shortly this summer and which all sales agents must comply with.

The warning comes from David Beaumont, who runs Property Industry Eye’s free compliance helpline, and who says that estate agents appear to have been singled out.

Beaumont said: “The Regulations come into force in just 11 weeks’ time, but we do not know exactly what they will include as the Government is still consulting.

“However, we do have a draft of the Regulations, called The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which include criminality tests for estate agents.”

Beaumont said he is not expecting the requirement to change.

The new Regulations, which apply to sales agents only, and not – as had been expected – to letting agents, come in on June 26. From that date, agents must start applying for approval, including criminal record checks, with everything to be in place by June 26 next year.

The EU directive that triggered the introduction of these Regulations requires necessary measures to be taken to prevent individuals who have been convicted of relevant offences from holding a management function in an estate agency or being a ‘beneficial owner’ of an agency.

Relevant offences are outlined in the schedule to the Regulations and are those that impact on the risk of money laundering or terrorist financing, or those that have a bearing on whether a person is suitable to hold a management function in an estate agency.

However, Beaumont said: “The list includes very serious offences, as you would expect, but it includes offences involving deception or dishonesty and offences relating to State benefits.

“It even lists some offences under the Estate Agents Act.

“It means that estate agency businesses will need to take reasonable care to ensure that the beneficial owners of the business, such as shareholders or partners plus directors and managers, have passed the criminality test and been approved by HMRC.”

Beaumont said: “I think agents will be shocked to find out about this obligation, if only because it adds yet another layer of red tape on to a profession that seems to continually to be in the spotlight.

“For me the question is not whether this change is appropriate: the question is why, yet again, is it agents that are being targeted?

“If this test is appropriate for agents, why is it not appropriate for businesses in other sectors?

“What really surprises me is that none of the trade bodies have made any comment on it, or lobbied about the targeting of agents, objected to it, or even warned agents about its impending introduction.”

Beaumont also warned that the obligation to obtain approval rests with the individual, not the estate agency business.

He said: “This means there will not be one application per business – there will be numerous.

“It is ridiculous to think that HMRC will process applications and issue approvals without charging a fee, but we do not know at this point.

“The checks are all about criminal convictions and so I suspect Disclosure and Barring Service checks (previously called CRB checks) will be involved, which will have a cost, regardless of any HMRC fees.”

Beaumont went on: “HMRC are currently working on guidance, but as the Regulations are in the consultation period until tomorrow, they are unable to provide any clarification.

“HMRC can even get court orders to force individuals to sell their interest in an agency if they are prosecuted for a relevant offence, and anyone acting in breach of a prohibition risks a £5,000 fine and two years in prison.”

Agency businesses will be able to operate until June 28, 2018, with people in place who do not have approval, provided those people have placed their applications for approval to HMRC before that date.

EYE’s free compliance helpline is available exclusively to subscribers on 0161 727 0798.

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Source:: EXCLUSIVE: Agents will have to undergo criminal checks under new Money Laundering regime