Data Protection and Money Laundering

Published on 2015-07-16

The Data Protection Act 1988 includes data (e.g. personal information about sellers, buyers, landlords, tenants or applicants) held in a paper or electronic filing system and requires that it is accurate and relevant, held with consent, kept up to date and kept securely. Collecting or processing data not relevant to the estate or letting agency’s work would be considered a breach of this legislation. Any organisation processing personal data must be registered with the Information Commissioner’s Office.

Money Laundering

Money laundering can be defined as ‘concealing the origins of money obtained from criminal activities, in order for it to appear that it has come from a legitimate source’. In estate agency, this is often where money from the proceeds of crime is used to buy property, which can later be sold. Thus transforming ‘dirty’ money into ‘clean’ money, concealing its original and illegal source.

To specifically meet money laundering concerns, the Money Laundering Regulations 2007 came into force in December 2007. While this affects estate agents, there is some confusion whether the Money Laundering Regulations apply to those solely involved with residential letting and management.

Obligations

To comply with Money Laundering Regulations, certain procedures must be followed when a business relationship with a client is commencing and when dealing with a transaction where a cash payment of more than 15,000 Euros is involved (or less if money laundering is suspected).

A letting or management agency may be affected when they are involved with a premium lease or the sale or purchase of a property investment on behalf of a landlord. The obligations are as follows; the CATCH acronym can be used:

Confirm the client’s identity, as soon as possible after initial contact is made. This will normally be the seller, but could be the buyer or landlord. Two forms of identification are needed; one to verify the address and the other for photographic evidence. Where the client is a company, the identity of shareholders or directors should be verified, or searches of Company House and a credit reference agency search can be made. If dealing with someone acting on behalf of somebody else, both parties should be checked.

Lettings agents involved with the sale of residential property will also be expected to identify the source of a buyer’s money and reasons for the business transactions. Cash buyers need to be qualified by asking for a bank statement, or a letter from their solicitor or bank manager.

If any required information is refused, then the Money Laundering Regulations need to be explained, or the situation reported to the agent’s Money Laundering Reporting Officer (MLRO).

Appoint a senior member of staff to be the MLRO to decide if action is required when suspicions are aroused. Suspicions should be reported to The National Crime Agency (NCA). A letting and management only agency will need to decide whether their business warrants one.

Train staff to recognise suspected money laundering situations.

Control systems for money laundering should be put in place.

Hold all records for five years.

Penalties will be incurred for breaching the Regulations.

Registration

Estate agents are required to register with HMRC under the money laundering regulations. If a letting and management agent buys or sells property on behalf of a landlord client, they will also need to register.

 

Categories: Residential Sales Residential Lettings General Law