Reducing economic crime in the property sector
Purchasing property in the UK is a common method that can be used by serious organised criminals to launder the proceeds of criminal activity. This position paper includes recommendations that the UK Government should include in future legislation as well as other plans and reforms to reduce economic crime.
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.
Anti-Money laundering high on UK Government’s agenda
Following HM Treasury approval, on 27 July 2022 the UK Government updated guidance for estate and letting agent businesses supervised for anti-money laundering. Designed to help agents comply with the Money Laundering Regulations 2017, it covers customer due diligence, record keeping and reporting suspicious activity.
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.
More recently we met with senior politicians to lobby 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.
New Register of Overseas Entities launched
The new Register of Overseas Entities is being introduced by the Economic Crime (Transparency and Enforcement) Act which has launched today, 1 August 2022. It will be held by Companies House and forms part of the UK Government’s strategy to combat economic crime.
Related news
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.
Economic Crime levy to increase after income target missed
Very large property agencies, based on their UK revenue, will see contributions to the Levy double from April 2024 after receipts for the period April 2022 to March 2023 showed a shortfall against the target of raising £100 million per year, which is used as long-term sustainable funding to tackle economic crime.
Propertymark lobbying leads to hope for pooled client account access
A consultation launched by HM Treasury could be the catalyst for change in the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 and end the ongoing problem of access to appropriate banking services for letting agents, which is the result of banks failing to properly understand how client money protection and anti-money laundering apply to unregulated firms.
HMRC remind agents to keep email contacts updated
Email and secure messaging are HMRC’s main means of contacting agents about their AML supervision. They provide regular updates and alerts to support compliance with the Money Laundering Regulations and notifications if an account requires action or needs to be reviewed, so it is crucial that contact email addresses are kept up to date.