New EU anti-money laundering directive means added burden for estate agents

A new anti-money laundering directive from the European Union that has come into force is set to be a financial and administrative burden on estate agents and surveyors in the UK, it is suggested.

The fourth EU directive has received minimal prior warning and many agents and surveyors may be unaware of its details, according to Gordon Dadds, a legal and professional services firm.

The firm believes that the directive will mean a doubling of administration for agents, increased costs and also slow down the buying process for everyone and for larger estate agent groups is could lead to a combined additional costs of £6 million.

It points out that directive, combined with the new investigation power being introduced by the Criminal Finance Act 2017, is going to impact the UK property industry significantly with banks and estate agents having to carry out further due diligence on both the buyers and sellers of property.

It reckons that this will slow down the buying process by up to 186 days and warns that there will also need to be formal risk assessments and nominated officers will have to be re-appointed if not currently an executive sitting on a board, or equivalent, of the business.

Gordon Dadds predicts that the new regime will increase workloads due to the required volume of administration with all polices now needing to be tailored to each client case and for the usual terms of business to be updated.

It explained that this doubling of the workloads will increase company costs with existing staff requiring training and in a high proportion of cases, estate agents needing to recruit staff in order to help with the administration burden.

Alex Ktorides, partner at Gordon Dadds, explained that the directive is a shake-up of the way that banks, estate agents and other parts of the regulated sector apply a risk based approach to customers.

‘They will now have to consider the characteristics of the customer, the product and its distribution and the jurisdictions involved in determining the lengths that they have to now go to in terms of conducting due diligence on their clients,’ he said.

‘There is even a new requirement to force overseas branches of UK parent companies to apply UK standards. This will cause huge concerns to international businesses and even encourage moving head offices from the UK,’ he added.

He also pointed out that the property sector now has to act quickly in order to ensure it complies with the directive. The purchasers and the seller are both now included in the application of customer due diligence, meaning additional checks will need to be carried out by estate agents, auctioneers and surveyors.

‘This is going to create substantial challenges for the property sector especially given the final version of the directive has only been made public today which has left no time for banks, estate agents and the lending sectors among others to update their policies and processes alongside training staff on the new regime,’ Ktorides pointed out.

‘Some agents have in excess of 100 branches and have received no prior time to implement the new processes in order to comply. For many smaller estate agents and surveyors this will be the first time they will have carried out checks on both the buyers and sellers and they are going to have to get up to speed with the regime as quickly as possible or risk facing a unannounced visit from the HM Treasury,’ he said.

The firm is urging the UK property sector to act fast and to start to get to grips with the directive from today. For many medium to large sized estate agents Gordon Dadds recommend they appoint a money laundering officer and a deputy to help with the increased work load and to ensure they are compliant and not falling foul of the regime which could spark a warning or fine from the HM Treasury.

However, Luca Primerano, head of strategy at anti-money laundering specialists, Fortytwo Data, the directive may not be of any use. ‘With terrorist attacks on the rise, any legislation that creates a more hostile environment for the funding behind them must be welcomed. The problem is, however much due diligence and additional risk assessment the new legislation introduces, it cannot be relied on to solve illicit money flows once and for all,’ he said.

‘The level of sophistication that today’s terrorist and criminal organisations use to launder their money is frightening, and while the new legislation is a step in the right direction strategically, operationally the average company or financial institution is light years behind the techniques being employed by terrorist networks,’ he added.

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