Though the full scale of money laundering in the UK property market is unknown, illicit activities have been steadily increasing for some time now.
As such, anti-money laundering regulations in the sector have been updated a number of times over recent years and it is important that estate agencies comply with the evolving rules to avoid hefty fines & sanctions.
What Is AML & KYC?
Anti-Money Laundering regulations are in place to mitigate the risk of money laundering and terrorism financing. Financial institutions are required to monitor their clients to prevent money laundering and report any financial crime they detect to relevant regulators. We explored the origins of money laundering in a recent blog post here.
Know Your Customer (KYC) is part of the process of verifying a customer’s identity. Most regulated markets require organisations to perform KYC checks in order to authenticate an individual. AML is an umbrella term for the range of regulatory processes firms must have in place, whereas KYC is a component part of AML that consists of firms verifying their customers’ identity.
The relationship between AML programs and the KYC process should be one of continuous feedback. As a subset of AML, KYC can be used to tailor an AML program to a business’ unique needs, refining customer risk profiles and enhancing compliance performance.
Qualifying organisations need to verify who their customers are before they engage in a business relationship; typically, customers are required to provide credentials such as ID documents in order to use a company’s service. By conducting thorough KYC & AML checks, businesses can meet regulations and dramatically reduce the financial, reputational and strategic risks from other entities.
What Checks Do Estate Agencies Need?
In 2019, Transparency International pinpointed £4.4bn of UK properties were bought by individuals with questionable wealth, a sum it said was likely to be “the tip of the iceberg”.
Estate agents are prime targets for money launderers as buying and selling property is a common method of facilitating the illicit flow of ‘dirty money’. Corrupt elites continue to utilise the UK property market, purchasing through complex systems of overseas companies, thereby disguising the true purpose and origin of money transactions.
In December 2020, the National Risk Assessment of Money Laundering and Terrorist Financing report increased estate agents’ money laundering risk level. This was due to authorities taking note of this increase in overseas buyers and overseas cash flow into the UK property market. Many estate agencies do not handle client money however, their relationships with both the buyers and sellers of properties can provide crucial information to identify suspicious transactions.
All estate agents in the UK are required to comply with a number of laws designed to prevent illicit funds passing through the UK. These include the Proceeds of Crime Act 2002, the Criminal Finances Act 2017, the Terrorism Act 2006 and the Money Laundering Regulations 2017.
Property transactions are seen by the UK Government and crime agencies as posing a particularly significant money laundering threat. As such the Money Laundering Regulations 2017 require estate agents to understand and verify exactly who their customers are and have evidence that they have completed KYC checks, verifying identity and carrying out risk assessments.
These checks serve to make sure that estate agents comply with legal obligations and help regulators ensure the UK real estate industry is not misused to facilitate money laundering or the financing of criminal activities. Should an estate agent become suspicious of a prospective client or existing client’s activities, it must report this to the National Crime Agency.
How We Can Help
Here at Hello Soda, we provide a range of solutions and specialise in KYC checks. Our global suite of AML & KYC solutions satisfy and comply with all regulatory requirements while helping verify your customers faster and more efficiently with more accurate results.
Using our single universal API, Sodium you can onboard up to 68% more customers compared with traditional identity verification methods. One simple integration; a flexible 360° solution which is scalable and secure.
Book a demo today and see for yourself how powerful our suite of solutions are.