For those in the property sector, compliance with anti-money laundering (AML) regulations is essential. Not only is it a legal requirement, but it also ensures credibility and trust within the property industry itself.
As deal packagers and sourcing agents, understanding and implementing AML measures is key to protecting yourself, your clients, and the integrity of your business.
AML is one of the common challenges we see property professionals face, either through:
- Lack of understanding and knowledge (not knowing where to find the right information)
- Failure to put the right measures in place (usually related to above)
- Not registering promptly after registering their business on Companies House
- And/or receiving a fine from HMRC (see our recent find report here)
To try and get ahead of these challenges, we have created this short guide as an overview of what you need to understand about AML – and why.
What is Money Laundering?
Let’s start with the basics: Money laundering is the process of disguising the origins of illegally obtained money to make it appear legitimate. Criminals often funnel illicit funds through complex financial transactions or property deals to make the money harder to trace.
Property transactions are a frequent target for money laundering due to the high-value nature of real estate and their ability to ‘clean’ large sums of cash in a single transaction. This makes it essential for anyone involved in sourcing or packaging property deals to prevent their services from being exploited for illegal activity.
Why Do Deal Packagers and Sourcing Agents Need to Be Aware of AML?
Property professionals should act as intermediaries between property investors and property deal opportunities. With this responsibility comes the duty to comply with HMRC’s AML regulations.
Failing to meet AML obligations can have serious consequences, from reputational damage to severe financial penalties.
Additionally, agents who are found to have facilitated money laundering, even unknowingly, may face legal action – this is incredibly important – and absolutely critical as to why agents need to be well-versed in AML requirements.
“AML is not just about compliance, it’s about safeguarding your business.”
Tina Walsh, CEO of NAPSA
What Do Property Professionals Need to Have in Place to Cover AML?
To stay compliant, sourcing agents and deal packagers must establish a robust AML framework, including:
Ongoing AML Training
Regular training for yourself and your team is essential. Keeping up to date with legal requirements and emerging threats ensures you stay ahead of compliance challenges. Money laundering and the methods criminals go through to carry it out are ever evolving, and unfortunately property is a prime target for these criminals in the UK.
A good AML training course will not only run through what money laundering is, it will provide you with guidance on how to spot it, and what to do if you do suspect it occurring.
Risk Assessments
Sourcing agents must have in place an overall business risk assessment as well as client (seller & buyer) risk assessment/analysis forms. They have to carry out a risk assessment on their business and on every investor, seller, as well as every deal. This includes evaluating the risk levels associated with individuals, the nature of transactions, the source of funds and sometimes the source of wealth.
If you are unsure of what documents and processes you need to have in place, we advise you review the Complete Sourcing Programme, which provides in-depth AML training, as well as walk-throughs on due diligence processes and documents.
The course has been written and recorded by NAPSA’s CEO, Tina Walsh, through our training partner Professional Sourcing Compliance (PSC).
Controls & Procedures
Documents which provide a step-by-step process as to how to deal with a seller or buyer from first contact to completion of the purchase or sale of a deal. These documents must reflect the type of client that you are dealing with, for example an individual, company or trust and the ‘Risk Rating’ allocated to that client during the risk assessment process.
Covering everything from obtaining and reviewing identification documents, financial details, and building your KYC knowledge, to verification checks to confirm the identity of all parties involved in a deal and the source of funds and/or source of wealth.
Internal Controls
Once you’ve completed AML training and set up your policies, risk assessments, controls and procedures, you need to make sure everyone in your team is clear on how to prevent, detect and report money laundering activities.
Register with HMRC
IMPORTANT! Please do not register with HMRC unless you have all other compliance in place, including appropriate AML and Data Protection training, all other required registrations and insurance.
You must have these in place, plus the knowledge of what you are required to do – and be able to show this – before you register with HMRC.
What Happens if You Don’t Comply?
We have worked with agents who have been randomly selected by HMRC to be checked – given less than 14 days notice to be able to prove their compliance and knowledge.
These were agents who had recently set up, been set up for a number of years, or never even traded. HMRC doesn’t care who they check – if you appear on their radar as sourcing or deal packaging, they could very well come and check you at very short notice.
Be aware that you don’t have to have a company registered on companies house, have a website, or even a big presence on social media to be found; it is likely that HMRC are in (anonymously) WhatsApp and Facebook groups!
Non-compliance with AML regulations can lead to hefty penalties from HMRC, including fines and potentially the suspension of your registration.
For example, businesses found to have “significant” AML failings: may face financial penalties ranging from a couple of thousands to even hundreds of thousands of pounds – depending on how much you have traded and the severity of failings.
Additionally, facilitating money laundering knowingly or not, can result in criminal charges, reputational damage, and the loss of your business.
Why Do Property Investors Need to Be Aware of AML?
Whilst the checks and compliance predominantly sits with the sourcing agents and deal packagers, investors also play a role in the process. Investors must ensure they are dealing with compliant, professional and credible agents who understand and follow AML procedures.
Partnering with professional sourcing agents and deal packagers – such as those checked and approved by NAPSA – who adhere to HMRC’s guidelines, protects your investments from legal risk, safeguarding your reputation and financial security.
Remember, money can be laundered on the sale equally as much as on the purchase, don’t take it for granted that your solicitor will carry out all the checks required; a good sourcing agent will find any issues before it’s even passed to your legal team; potentially saving you a lot of time and money.
How Does NAPSA Help Sourcing Agents and Deal Packagers with AML?
There are a number of ways we support out members with their AML responsibilities, including:
- Provide 1-2-1 Compliance Support to all members, to make sure they understand what they need to meet current standards, have the right policies, controls and procedures in place to protect their business
- Sharing up-to-date guidance in our Professional Community – so we if know of any changes, our agents will too
- Provide 25% Discount on Training – to help save costs for ongoing AML training, we work with our partner PSC to provide a great discount on compliance training
Sourcing agents and deal packagers can join NAPSA to receive all of this and more, for just £195 +VAT per year. Find out more here.
We are also here if and when things go wrong
Not all sourcing agents have joined us in time for us to flag discrepancies in their AML procedures before receiving a 14-day notice letter from HMRC.
However, we are on hand to help ALL of our Members and in a number of cases now we have been able to steer the businesses on the correct course and either help them avoid fines altogether, or instead receive an improvement report to work on. These are all significantly better, than the fines they could have faced.
We can’t change previous mistakes, but we can help you to correct to avoid future ones.
If you have received a letter from HMRC, or concerned you might, please get in touch with our team at [email protected] – or join our Membership – so we can work with you to get your business in compliance shape.
