We have recently had an influx of calls on the helpline about lettings agents and their obligations under the new money laundering Regulations. Previous posts on the Regulations can be read here.
In summary, the Regulations apply to estate agency work only however, as pointed out before it is not that simple. The reason for this complexity is that quite a few estate agents also have a lettings arm.
One of the key elements of the new Regulations is the need to carry out an internal risk assessment of the business, identifying sources of money laundering risk, and implementing procedures to reduce or eliminate those risks. For estate agents with a letting arm one of the key risks that will have to be considered is clients entering into a business relationship within the lettings arm, where money laundering vigilance may be lower and then using the existence of that business relationship to move across to the estate agency side where money laundering risks are much higher. This is a very real risk and is well documented in other professional fields.
There are a number of ways that this risk can be reduced. One of these would be to ensure that every person that moves across from a letting agency instruction to an estate agency instruction is fully risk assessed and checked. In practise, this may be very difficult especially with a large company, or where the client is a public figure and so an alternative method might be to simply risk assess and check all lettings agency clients on the basis that they are likely at some future stage to become estate agency clients.
Agents will not like the implications of this new structure. However, the consequences, should money laundering be discovered are severe and the new risk assessment based approach to money laundering requires a careful consideration of all the potential routes that criminals might take to enter into a business relationship.