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Money laundering – how will HMRC view these buyer scenarios?

NES NS

Agents need to conduct a money laundering risk assessment and conduct customer due diligence on buyers – that is a statutory duty that comes from the Regulations not HMRC.

The guidance HMRC has issued on the subject currently states that the buyer’s identity must be verified before the contracts are exchanged and so in theory agents have weeks, if not months, to obtain the appropriate ID.

In practice, if it is not carried out early in the buying process the chances of being able to do it diminish as time goes by.

My advice therefore is the same as HMRC – do it as soon as possible once an offer is made.

However, there are a few scenarios that do not fit with the HMRC perception of estate agency and they are ones they have not considered, as yet, and they possibly never will as the answers are unlikely to fit with the requirements of the Regulations or the guidance!

  1. An online agent is instructed to market a property and the seller pays for the basic service up-front. All potential viewings are generated through the website and are handled by the seller not the agent. Viewings, negotiations and agreeing a sale are handled by the seller and the agent is simply advised when a sale has been concluded to cease marketing.
  2. An agent is instructed to market a property by a property developer who has a show home on site and the developer handles all the negotiations and agrees all the sales and the agent gets paid for simply marketing the property.
  3. An agent sub-instructs a number of other agents who introduce potential buyers to the property. All the negotiations and sale agreement are handled by the initial agent and the sub-agent is paid a finders fee, if their buyer purchases the property.

There will be other scenarios similar to these where the agent and the buyer have little or no contact and so the opportunity for the agent to meet their statutory obligation is not going to be possible.

If you have any other situations that HMRC should be aware of let me know by emailing the details to david@compliance-matters.co.uk

We can only assume, or hope, that they will take a practical stance when enforcing the Regulations and compliance with the guidance.

  • This article is by David Beaumont who runs Compliance-Matters, an agency compliance specialist. He provides free advice to Property Industry Eye subscribers on any compliance matter. You can contact him on 0161 727 0798. Compliance-Matters in conjunction with Landmark are running FREE update sessions around the country on the new Money Laundering Regulations. To find your nearest venue click HERE.
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