RICS Alert - Money Laundering Regulations Update

Posted on 03 / 07 / 17
by Jen Lemen

RICS Alert - Money Laundering Regulations Update

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Property Elite’s sole aim is to build better property professionals - supporting your career every step of the way, whether you are completing a RICS accredited degree course, your RICS APC or simply seeking engaging CPD.

Our RICS Alert blog series provides you with the latest updates on professional standards and guidance.

This blog article will focus on what you need to know about the latest update to money laundering regulations.

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Relevant RICS APC competencies:

  • Conduct rules, ethics and professional practice

Why is this relevant?

Money laundering is a criminal offence, so it is one of the most significant areas of risk for property professionals.

The risks are potentially greatest for estate agency work, as it often involves the transfer of large sums of money.

Are you aware that the regulations were last amended to take effect on 26 June 2017?

In this blog, we will consider the following:

  • What is money laundering?
  • What regulations apply?
  • What is new?
  • What are my responsibilities?
  • How can I reduce the risk of money laundering?
  • Where can I access further training?

What is money laundering?

HMRC defines money laundering as 'exchanging money or assets that were obtained criminally for money or other assets that are ‘clean’. The clean money or assets don’t have an obvious link with any criminal activity. Money laundering also includes money that’s used to fund terrorism, however it’s obtained'.

What regulations apply?

What is new?

The 2015 EU Fourth Money Laundering Directive, required new UK law to be introduced by June 2017.

This has come in the form of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which came into effect on 26 June 2017.

A key change is that the business relationship for agents has been extended to include both the buyer and the seller of an asset. Additional due diligence requirements have also been introduced.

HMRC and RICS are yet to produce updated guidance for the property sector, although both were involved in consultation for the new legislation. We keenly await further guidance to fully explore the implications of the new guidance for property professionals.

What are my responsibilities?

The Money Laundering Regulations 2007 apply to the 'regulated sector' (i.e. those at high risk of being used by money launderers), this includes estate agents but not managing or letting agents.

Regulated firms must have systems in place to avoid money laundering and must report suspicious activity via Suspicious Activity Reports, also known as a SAR.

Non-regulated firms must also submit a SAR if money laundering is suspected. However, all property professionals should be aware of the risk of money laundering and it's potential implications.

Specific money laundering offences are defined by the Proceeds of Crime Act 2002:

  • Concealing, disguising, converting or transferring criminal property (which the person knows / suspects represents the proceeds of crime)
  • Becoming involved in an arrangement relating to criminal property
  • Acquisition, use or possession of criminal property
  • Disclosing or 'tipping off' that a SAR has been made

Finally, if you suspect that terrorist financing is being used, then you must report this under the Terrorism Act 2000.

How can I reduce the risk of money laundering?

Ensure you have appropriate and adequate systems in place to identify and monitor the risk of money laundering. These include:

  • Risk assessment
  • ID checks - customers and 'beneficial owners' of companies
  • Reporting suspicious activity via a SAR submitted by the firm's nominated money laundering reporting officer to the National Crime Agency (NCA)
  • Appropriate management controls
  • Keeping all relevant document safely and securely
  • Employee training and CPD

Where can I access further training?

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