What is money laundering?
Money laundering is the process of 'cleaning' money gained from criminal activity so that it appears to have been legitimately acquired.
The sheer size of the property market in the UK and the high value of property assets means that extremely large amounts of criminal funds can be ‘cleaned’ in a single transaction. Between 2016 and 2022, Transparency International report that an estimated £6.7bn of UK property has been purchased with wealth suspected to have been obtained from questionable funds.
Propertymark's position
The sales and lettings sectors, property auctioneers and high value dealers are all attractive targets for those looking to launder money. The UK housing market is a highly desirable options affected by financial crime.
While the property sector remains largely unregulated, and without minimum standards to operate, the industry is vulnerable to attack. Our position paper, Reducing economic crime in the property sector, includes recommendations that the UK Government should include in future economic crime legislation as well as other plans and reforms to reduce economic crime in the property sector.
Following the release of the UK Government’s Economic Crime Plan and building on the introduction of the Register of Beneficial Ownership, the proposals set out in our position paper will help reduce economic crime in the property sector and ensure the UK isn’t used as a haven for criminal activity.
We need to ensure those working in the sector are qualified and regulated and we need a supervision regime that caters for the specific needs of the property sector. Agents need more support in complying with their legal and reporting obligations as well as how to carry out checks and we need more enforcement including a joined-up approach across the British Overseas Territories.
Propertymark's influence
Inputting into global guidance for the real estate sector
In July 2022, the Financial Action Task Force (FATF), which is the global money laundering and terrorist financing watchdog, revised its Risk-Based Approach Guidance for the Real Estate Sector.
The UK’s regulation of money laundering ultimately derives from the FATF standards. The guidance highlights the importance for the sector to increase its understanding of the money laundering and terrorist financing risks it faces.
Our Policy and Campaigns Team were instrumental in helping draft the guidance through a project which CEPI co-lead with the Governments of Canada and the United States of America.
Campaign success
Register of overseas entities
After years of campaigning the UK Government introduced a public register of overseas entities owning property in the UK through the Economic Crime (Transparency and Enforcement) Act.
In 2018, we gave evidence to the House of Commons Treasury Committee Inquiry into Economic Crime and hosted a roundtable with civil servants from the Department for Business, Energy & Industrial Strategy (BEIS) and members of Propertymark who work as estate agents to review the UK Government’s proposals for a register of beneficial owners of overseas companies and other legal entities.
In 2019, we proved a written response to the Joint Committee on the Draft Registration of Overseas Entities Bill, and we responded to the HM Treasury consultation on the proposed steps that the government will take to transpose the Fifth Money Laundering Directive into national law.
Over recent years we have met with senior politicians lobbying for the introduction of the Register of Overseas Entities and in 2022 we ran a virtual roundtable with Propertymark members and Companies House inputting to help shape the usability and development of the Register.
We called on the UK Government to introduce a public register of overseas entities owning property in the UK back in 2018 and it is high time that legislation has been brought forward. Despite repeated promises, including being mentioned in the December 2019 Queen’s Speech, the UK Government failed to deliver. But recent world events serve as a reminder that property is a high-risk sector for money laundering because any foreign company can buy property in the UK without having a presence in the country. Criminal funds can be concealed and made to look legitimate through an untraceable ‘company’ and subsequently the purchasing of property. To maintain integrity in our housing market it is vital to know who the ultimate owner of a property is.
related news
Economic Crime Act: new guidance for agents on information sharing
The Department for Business and Trade (DBT) has published in-depth advice for anti-money laundering (AML) regulated firms to explain the legal protections around sharing client data. The Economic Crime and Corporate Transparency (ECCT) Act 2023 introduced provisions that allow businesses to tackle AML by voluntarily sharing and receiving information, however, agents have raised concerns that they may be liable for breaches of confidentiality.
Fears that suspicious payment powers could delay property transactions
From the end of October 2024, UK banks will be able to hold payments for up to four days whilst investigations of potential fraud are carried out, raising concerns that the large transactions needed for property purchases may be incorrectly blocked. The change follows stricter rules on fraud compensation which came into force on 7 October 2024, meaning that banks must refund scam victims up to £85,000 within five days.
Anti-Money Laundering registration – consequences of non-compliance
In April 2024, HMRC announced fines of over £1.6 million for agents found to have committed various breaches, and we are concerned that agents, including some Propertymark members, may be incorrectly applying, failing to apply or not maintaining an accurate and up-to-date registration with HMRC.
Labour's Lammy sets sights on tackling financial crime
In a keynote speech at a conference held by the Institute for Public Policy Research (IPPR) on 21 May 2024, Shadow Foreign Secretary David Lammy MP, announced policies to combat corruption, including increased registration requirements for trusts which are widely used to disguise the ownership of assets such as property.
Ending two-tier AML system would close gaps in sector defences
In a letter to the Chancellor of the Exchequer, Propertymark has again laid out the benefits of extending full anti-money laundering (AML) supervision to all letting agents, including improved compliance with Money Laundering Regulations (MLRs) and solving the ongoing issue with access to pooled client accounts which has hampered agents for far too long.
Over 250 agents fined for AML non-compliance
HM Revenue and Customs (HMRC) has announced that fines totalling over £1.6 million have been issued for a variety of breaches including missing documentation, incomplete due diligence, and failures to recognise specific risks, such as Politically Exposed Persons, high risk jurisdictions, companies, trusts and sanctions.