A leading compliance specialist in the estate agency market has suggested that estate agents should be doing more to support efforts to complete customer due diligence and tackle money laundering.
Compliance Officer for The Guild of Property Professionals, Paul Offley, has said that agents should be following “best practice” to establish the legal/beneficial owner of a property as part of their Anti-Money Laundering compliance.
He says that while agents must identify the legal and beneficial owners, it is not common to obtain a copy of land registry documents, which verifies that the person is the owner or beneficiary of the property. Nor is it specifically mentioned in the legislation, although he suggests that it is something HMRC recommends and useful evidence in the event of an HMRC review.
“In my opinion, whether it is a requirement for the AML process or not, it is still the right thing to do as it identifies who the legal/beneficial owner of the property is, and not just that the person instructing the agent is named on the title deeds.”
“Other benefits include the fact that it allows the agent to complete their AML checks on all legal owners. It also prevents any delays to an agreed sale at an advance date and the potential of any Consumer Protection from Unfair Trading Regulations (CPR) claim against an agent from a buyer who backs out due to delays with a previously unknown owner suddenly appearing.”
Mr Offley cites the example of an agent taking any instruction from a landlord to let a property.
“A title document confirms that person instructing the agent is actually the landlord and owner of the property.”
“Plus, and importantly, it is a requirement of The Property Ombudsman code of conduct which states that the agent must take reasonable steps to confirm legal ownership, such as a land registry search or copy of the title deeds, or similar.”
While not commonplace there is provision within the Money Laundering Regulations for ID checks conducted by other parties in the transaction to be used as part of your own anti-money laundering activity. According to the Legal Sector Affinity Group Anti-Money Laundering Guidance for the Legal Sector 2021:
The benefit of reliance is that in certain circumstances it may allow practices to avoid duplication in complying with their CDD obligations and facilitate a client’s swift and convenient access to legal services. (6.23)
However, the firm remains liable in the event that errors in third party checks
You should note that you remain liable for any non-compliance with CDD requirements when you rely on another person. For this reason, you should view reliance as a risk as, if things go wrong, it is you that will be held responsible. It may not always be appropriate to rely on another person, especially where there is a higher risk of money laundering, requiring enhanced due diligence measures (6.23)
Work is currently being done to streamline the process of client verification across the property sector. A pilot is currently underway as part of a project to create a digital identity trust framework which would one source of client verification for ALL parties in a transaction
MyIdentity is set to become the central hub for both consumers and the real estate industry, helping people prove who they are, once, in a more secure and digital way. The MyIdentity scheme has been launched, aligned to the DCMS Digital Identity and Attributes Trust Framework, ensuring there is a set of Government-backed standards for the industry to adopt. This will help consumers prove their identity in a secure, trusted and frictionless way whilst de-risking the process for the estate agency, legal and financial sectors as we all work together on the MyIdentity standards. Working with leading identity providers Digidentity, Nuggets, OBiD, Thirdfort and Yoti ensures a fully inclusive set of choices for consumers to prove their identity, helping them complete the sale and purchase of their home more efficiently and securely.
The Council of Licensed Conveyancers is encouraging CLC regulated firms to get involved in the trial which it is hoped will enable a client to get their identity verification done once by a certified identity provider and to then be able to share that verification with all other service providers through the sales process.
The core of the transaction centres on proof of identity and ownership and currently organisations will not trust identity verification carried out by another organisation. This is causing a continuing increase in time to complete the transaction with poor consumer experience and ample opportunity for identity and subsequent fraud.
The common view is that the introduction of a standards based digital identity assurance process, backed by regulators and based on Government standards, should be adopted by the industry.
For more information about the trial and to get involved click here.
