Out-Law / Your Daily Need-To-Know

HMRC scrutinises AML compliance by estate agents

Out-Law News | 21 Aug 2020 | 3:25 pm | 1 min. read

A recent fine issued by HM Revenue & Customs (HMRC) against Purplebricks has highlighted the increased scrutiny estate agency businesses are coming under in the UK for their compliance with anti-money laundering (AML) regulations, experts have said.

Purplebricks was fined £266,793 after HMRC found the company had breached the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

"These breaches are failures in having the correct policies, controls and procedures, conducting due diligence and timing of verification," HMRC said in a brief statement published on its website.

The fine imposed on Purplebricks is the latest action HMRC has taken in respect of compliance with AML regulations by estate agency businesses. Last year it carried out a number of unannounced inspections of businesses it suspected of trading without registering with it, and at the time pledged to "take action", such as by issuing potential fines or pursuing criminal proceedings, against businesses that failed to comply. HMRC also previously imposed a £215,000 fine on Countrywide Estate Agents for non-compliance with AML requirements.

White collar crime expert Andrew Sackey and financial crime investigator Hinesh Shah, both of Pinsent Masons, the law firm behind Out-Law, said it is clear from the various developments that HMRC is using its regulatory powers to continue to take action against what it considers to be inadequate anti-money laundering controls and processes and that estate agency businesses need to review and enhance their existing AML governance framework.

Sackey said: "In addition to being the UK’s tax administration and the country’s most prolific financial crime law enforcement agency, HMRC is also a supervisory body for money laundering regulations. Task force activity such as the week of action mean that HMRC has already identified AML compliance risks in the estate agency business model; if it considers that insufficient improvements have been made since then, and a stronger deterrent impact is needed, it’s open to HMRC to refer suitable cases to its Fraud Investigation Service to initiate criminal proceedings to drive home a stronger message that compliance improvements are non-negotiable."

Shah said: "It’s clear there is still a significant amount of work to be done by some estate agency businesses to improve their anti-money laundering policies, processes and controls. This might slow down the speed at which transactions are completed - with customer due diligence procedures likely to take longer - but the investment in enhancing governance frameworks will be significantly less costly than potential fines issued by HMRC if estate agency businesses continue to fall foul of money laundering rules."