KYC & AML requirements for estate agents and how real estate is used for money laundering


Popular BBC drama McMafia is apparently holding a mirror up to money laundering in the London property market, accurately portraying the industry to be a haven for criminals looking to clean up “dirty” money.

The London property market has long been criticised for loopholes offering hiding places for corruption. The Land Registry lists the names of all property titleholders in the UK but owning a property through an offshore company can provide anonymity to owners.

New research from non-governmental anti-corruption organisation Global Witness shows that 85,000 properties in the UK are kept by companies whose ownership is unidentified to authorities, as a result of being based in countries known for their anonymity such as British Virgin Islands or Maldives. The top ten most expensive properties owned by anonymous owners are worth over £1.5 billion.

But a new UK property register is set to change that. The draft bill calling for a central beneficial ownership register of overseas companies that own UK properties is expected by summer 2018, and the register is intended to be functional by 2021. From then on, overseas property purchasers will be required to provide full details of all beneficial owners.

In June 2017, new UK Money Laundering Regulations (4AMLD) were implemented, increasing Know Your Customer and Anti-Money Laundering requirements for estate agents.

One of the biggest changes was that estate agents must undertake full KYC and CDD checks on buyers as well as sellers, this includes source of funds. But with anonymous offshore companies being listed as buyers of so many properties, clearly 4AMLD hasn’t gone far enough to put off potentially corrupt purchasers.

All estate agents must also be able to demonstrate a risk-based approach. In order to comply with 4AMLD, estate agents must be able to identify the level of risk posed by both buyer and seller from an AML perspective, and have an AML officer in place.

Any estate agents failing to comply with current regulations are risking potentially large penalties from HMRC.