Real Estate

Letting agents face huge task in staying anti-money laundering compliant

Changes to anti-money laundering (AML) regulations for letting agents could see more agents hit with fines, AML platform FCC Paragon has warned.

As of 14th May this year, new financial sanctions reporting obligations will come into force, requiring letting agents to verify the identity of tenants and landlords, check that they don’t appear on the UK’s financial sanctions list, report any suspected money laundering or suspicious financial activity and, monitor and report all tenancy agreements regardless of rental value.

Paragon said the latter is the most significant change, as currently, reports are only required where the monthly rent paid exceeds 10,000 EUR per month (£8,300).

Bekki Leaves, managing director of FCC Paragon, said: “The changes to anti-money laundering protocols are, for the large part, a positive that should provide a far greater degree of protection to landlords at all levels of the market.

“There’s no doubt that illegal practices aren’t refined to properties with asking rents of 10,000 EUR or more and so greater protections at all levels of the market should help to crack down on criminal activity.

“However, there’s a good chance that AML fines could climb, at least initially, as letting agents struggle to get to grips with the huge increase in the resources required to stay AML compliant.

“It’s vital that they take a proactive approach if they want to avoid what can be hefty fines and the best place to start is to assess their onboarding and monitoring processes, whilst establishing clear reporting channels.

“Investing in third party help is likely to be paramount as they will no longer be able to process the paperwork required by utilising outdated methods such as manual checks. ID verification software and AML compliance platforms are well worth the investment if it means staying AML compliant and avoiding the wrath of the FCA.”

Across the UK just an estimated 2.5% of all rental listings have a monthly asking rent of 10,000 EUR (£8,300) or more, demonstrating the huge increase in red tape that could come as a result of the latest changes to AML reporting requirements.

The most recent government figures show that estate and letting agency businesses were fined £3million in a single year as a result of 468 AML breaches, with the average (median) fine coming in at just over £4,000.

Whilst changes to vet every rental agreement created should, in theory, provide greater protection across the board, the huge increase in resource required to remain AML compliance could see many agents struggle and actually lead to an increase in AML fines issued, FCC Paragon warned


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