All estate agents and estate agencies are required to undertake AML checks for every property transaction that goes through their practice, but what exactly is an AML check, and why is it a crucial step in estate agency's sales and lettings processes?
What is AML?
AML stands for anti-money laundering, so an AML check essentially ensures that your clients are who they say they are when buying, selling or letting a property.
Money laundering is a financial crime involving the illegal practice of legitimising money gained from criminal activities. Unfortunately, the property market is often targeted by individuals and businesses that partake in money laundering as large amounts of cash can be 'cleaned' or 'laundered' in property transactions.
Although many tend to associate money laundering with individuals buying properties in one lump sump, rentals are prime targets for money laundering. Customer due diligence should be taken out on both the landlord and tenant(s) to verify that both parties' income is from a legitimate source.
What is due diligence?
The term 'due diligence' is thrown around a fair bit in property transactions, but the term can be used in two different ways. From the tenant or buyers perspective, their due diligence is checking that a property is in good order and condition before they move in. From an estate agent's perspective, and from a business perspective, due diligence is the process of examining a company and its financial records before becoming involved in a business arrangement with it.
Ensuring due diligence for your agency is also key to comply with HMRC regulations, so it is crucial for AML checks to be integrated into the sales process. Not only is an anti-money laundering check a crucial step in preventing fraud, it is a legal requirement for estate agencies and ensures their due diligence in sales and lettings transactions. All estate agencies must be registered with HMRC in accordance with the Estate Agents Act 1979, so all estate agents must follow HMRC anti-money laundering compliance.
What is the difference between a KYC and an AML?
There are many different types of anti-money laundering checks which can verify the identity of your clients and where their money is coming from. AML is an umbrella term which includes different types of checks, including KYC checks.
KYC stands for 'know your customer' and allows staff of finance businesses to verify the identity of their customers. Know Your Customer checks are ID verification checks and should be used in conjunction with other AML checks in property purchases.
For estate agents, a Know Your Customer is key to ensuring your clients (whether they're buyers or sellers) are who they say they are, and aren't committing any underhand practices. It is standard practice for estate agents to ask for ID verification from clients as soon as they enter into a sales or lettings process.
AML vs. GDPR
It can seem tricky to ensure compliance with both GDPR regulations and anti-money laundering regulations. However, in section 6 of the GDPR legislation, guidance protects the right for data to be processed if it is required by an enactment. Also, estate agents can address the issue of GDPR in identity verifications in their AML risk assessments to safeguard their processes.
At Dezrez, our estate agency software has been built to help you remain compliant in everything you do through the CRM. Read more about our integration with Credas to find out how we can help you order and store AML checks directly within Rezi.
How do AML checks work?
Money laundering is a serious risk to estate agency businesses, so ensuring your due diligence and compliance is key to avoid any hefty fines or association with financial crime.
Anti-money laundering checks are complex processes which vary on a case-by-case basis. These checks include, but are not limited to KYC identity checks and ID verification, PEP (politically exposed person) checks, and sanction checks.
You can order reliable AML checks within Rezi estate agency software with just a click of a button, thanks to our integration with Credas!
A basic AML check would include:
- Name, Date of Birth and Address verification.
- ID verification, including biometric facial recognition.
An enhanced AML could include:
- Name, Date of Birth and Address verification.
- ID verification using biometric facial recognition.
- PEP checks on a client and their families.
- Sanction checks across multiple databases.
- Known as Deceased checks.
HMRC regulations require businesses to adopt a risk- based approach rather than a step-by-step process. Essentially, for estate agents, this means that agencies must evaluate the risks which may affect their businesses in AML risk assessments. Agencies should impose procedures to assess whether their clients have high-risk or low-risk profiles.
Online estate agency businesses and lettings agencies are often at a higher risk of being targeted for money laundering as users may utilise fake digital identities to attempt purchases. Because of this, it is crucial that online agents complete comprehensive digital identity verification and document verification for all users (buyers, sellers or tenants) as a part of their sales processes.
AML risk assessments
Risk assessments are key part of an agency's compliance with AML, and safeguards your estate agency business against fraudulent transactions.
There is some wiggle-room for how to conduct an anti-money laundering risk assessment but it should consider:
- The size of your business.
- The transactions which your agency handles (ie: sales/ lettings).
- The types of customer you have (ie: cash buyers).
- How money is transferred through your estate agency business.
- Whether your client or the property they're interested in has a beneficial owner.
Each agency's AML risk assessment should be specific to their practice, for example, if your agency is a premium agency that deals with high profile clients, you'll want to include PEP checks more regularly. Some larger agencies can appoint a compliance officer who handle cases of suspicious activity and follow the progress of anti-money laundering cases closely.
For all estate agencies and lettings agencies, including those with a compliance officer, integrated AML checking software can help to streamline the complicated process of anti-money laundering procedures and ensure thorough verification of client identity and information across multiple national and international databases.
There is comprehensive HMRC guidance for estate agencies to meet the requirements of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
What do you do if you suspect suspicious activity?
It's important as an estate agent not to jump to conclusions when it comes to suspecting suspicious activity. There may be many legitimate reasons why a sale may appear suspicious: for example, a client may be want to purchase a property using a significantly large cash payment that was gifted by a family member.
With that said, it is important that if the facts suggest that money laundering could be taking place, be sure to report any instances you suspect. Failure to comply with AML regulations can lead to fines between £15,000 and £25,000.
In line with HMRC guidance, if you suspect money laundering in a transaction you should send a Suspicious Activity Report (SAR) to either the National Crime Agency (NCA) or the HMRC Fraud Hotline. Further guidance for submitting a Suspicious Activity Report can be found on the GOV website.
To avoid fines of up to £25,000 – simplify your processes and order AML checks directly from within your Rezi estate agency software, thanks to our integration with Credas!
How can estate agents ensure they follow anti-money laundering regulations?
Due to the large amount of money which has the potential to be laundered through sales and lettings, estate agencies must undergo thorough and enhanced due diligence measures.
Dezrez's integration with Credas makes it simple for estate agents to ensure their compliance with AML regulations and due diligence for their agencies.
Credas is an AML software system that automates AML searches to protect financial businesses and estate agencies from cases of fraud and money laundering.
Credas undergoes thorough, best practice anti-money laundering checks to verify key information, including identity verification, Known as Deceased checks, PEPs, document verification and more. Using advanced technology throughout their AML checks, such as real-time facial recognition, Credas provides online ID verification which is as effective as face-to-face.
Credas can verify over 4,000 types of identity documents seamlessly, including passports and photo IDs, reducing the identity verification process from hours to a matter of minutes. The digital platform prompts users to take a selfie for identity verification purposes in the initial stages of the identification process to ensure consistency throughout the AML search.
For busy estate agents, Rezi's integration with Credas offers peace of mind and complete due diligence compliance so that fraud and money laundering is the least of your worries when chasing sales and lettings! You can action an AML check directly from your Rezi estate agency software using an automated workflow and verify your clients in the time it takes to make a cup of tea!
Check out how Rezi's integration with Credas can streamline your agency's AML regulation compliance straight from your estate agency software.
