On 10 January 2020 the Fifth Money Laundering Directive (5MLD) came into force in the UK. Our previous post can be read here.
Unfortunately, despite coming into force more than 21 days ago we still do not have a guidance document. However, HM Treasury has issued a response to the 5MLD consultation which does have some guidance on what an agent’s obligations are in respect of client due diligence (CDD).
Under the 5MLD high value lettings and relocating agents are required to register their businesses with HMRC. Most agents who are also estate agents will have complied with this under the 4MLD. However, this obligation now extends to lettings agents who will need to register if they have not already done so by 10 January 2021. The government views HMRC as the appropriate body to supervise lettings agents hence this requirement to register. However, if you have registered as an estate agent you do not need to also register as an letting agent but advise HMRC of your lettings arm when you renew your registration.
It is the HMRC that was expected to issue a guidance document. Unfortunately, this response document refers to a guidance document being issued in the future. No set date is given therefore this response document is the only ‘guidance’ we have at present.
At paragraph 2.7 the response states that CDD should be carried out on all parties to a rental agreement. Consequently, for high value rentals of 10,000 euros or more a month CDD will need to be carried out on landlords and tenants. CDD must be carried on landlords prior to establishing a business relationship and on tenants before a contract or agreement is signed. This means that for landlords CDD must be carried out prior to signing any terms of business and advertising any property for rent. The response states that for tenants CDD should be carried out at the same time as Right to Rent checks are carried out.
Paragraph 2.7 then ends with ‘HMRC’s specific guidance for lettings agency businesses will provide further clarity on conducting CDD measures. This guidance is stated to include examples and a clear interpretation of how 5MLD should be implemented. Therefore, once we have the guidance, we will update this post. In the meantime, 5MLD is in force and must be complied with. Frustratingly, there is little guidance on how to do so but this response provides some indication of the appropriate way to comply.
The contents of this blog post is not legal advice and is provided for general information purposes only. If legal advice is needed readers should contact a solicitor. No responsibility for any information contained within this post is accepted and PainSmith solicitors accepts no liability in respect of the contents or for action taken based on this post.
Published 5 February 2020