Agents who ‘source’ property investment warned to take AML seriously or face huge fines

The UK’s property sector is one of the most vulnerable when it comes to money laundering, which is why all property professionals are required to have proper compliance procedures in place, or face the consequences.

Over the past few years, HMRC have made it very clear that they will not tolerate non-compliance and have handed out eye-watering fines to estate agents and other property professionals not meeting their AML obligations.

In fact, the sector accounts for almost half (45.4%) of all fines issued by HMRC, and in the first quarter of the 2022-23 financial year, fines to the estate agency sector hit £304,023 – equivalent to almost half (44%) of the total fines seen in the previous financial year.

And now, there is another section of the property sector that is being warned to get their AML ducks in a row – sourcing agents.

Many sourcing agents – agents who arrange property investment deals – are not registered with HMRC for AML purposes, as they don’t see themselves as at risk from money laundering given, they are the ‘middle man’ and often rely on the AML credentials of those they are working with.  

Others register with Companies House and then wait too long before registering with HMRC known as ‘co-sourcing’, and, according to Tina Walsh, CEO of the National Association of Professional Sourcing Agents (NAPSA), HMRC is becoming increasingly aware of such practices.

In a LinkedIn post, Ms Walsh said: “For attention of ALL those sourcing agents who have been advised that they can 'co-source' without full compliance in place; HMRC are now wise to co-sourcing and have just issued the first fine that I have seen for registering a business with companies house and leaving a gap before registering with them for AML supervision.”

The company is question was fined £1,700 for a gap of just under 12 months.

Martin Cheek, at SmartSearch said: “Ms Walsh is right to warn her members about AML. Sourcing agents are required – just as any other professionals working in the property sector – to register for AML and ensure they have all the right compliance procedures in place.

“Many have tried to get away with not registering – often because they have been advised that they don’t need to because they are covered by the compliance procedures of their clients– but they are now very much on HMRC’s radar.

“If HMRC identifies any sourcing agents that aren’t registered, they could potentially fine them – not just for failure to comply now, but also for the years they have been active without compliance, which could add up to thousands of pounds.

Martin Cheek, Managing Director at SmartSearch is urging any sourcing agents worried about their AML position to contact SmartSearch.

“We can set them up on our AML platform in a day, and then they will have access to identification, verification, screening and enhanced due diligence checks all form one place. We offer business checks, and ultimate beneficial owner checks – particularly important for property professionals as properties can be bought by anonymous companies which can be a red flag in terms of AML activity – and all checks are hosted on the system where they are checked daily for any changes.

“We can even run retrospective checks for an existing customer database to give sourcing agents a clean and compliant position, so that if HMRC comes knocking, they will have all their required checks and procedures in place.”

To find out how SmartSearch could help your firm create a smoother customer onboarding process and meet all its compliance requirements in one place, visit www.smartsearch.com