It has been announced that letting agents will be brought into the scope of anti-money laundering regulations set by the EU. Letting agents which facilitate transactions for rent of at least €10,000 each month will be held accountable under the Fifth Anti-Money Laundering Directive. This means that letting agents operating in London will be most susceptible to the new rules, which come into effect on 10th January 2020.
The Directive has four significant amendments to the scheme which exists in all EU Member countries, and includes:
– Legal entities such as the registers of beneficial owners of businesses must be available to members of the public.
– The scheme will be extended to allow for virtual currency exchange and electronic wallet service providers, and those which let property that yields more than €10,000 in rent each month.
– The threshold for identification of prepaid card holders will be reduced to €150.
– Improved due diligence rules must be implemented by member countries to strictly monitor any suspicious transactions, including high-risk countries.
It is currently unknown whether letting agents who conduct high-rental transactions must register with HMRC, like estate agents do already.
However, letting agents will most likely be required to operate with similar diligence as estate agents. For example, they may have to:
– Conduct customer due diligence
This includes identifying customers and confirming the documentation of buyers and sellers, as well as conducting continued monitoring.
– Screen prospective and current staff
This ensures effectiveness in conducting relevant functions with integrity and professionalism.
– Enhanced due diligence and politically exposed individuals
This will apply to situations with a higher probability of terrorist finance or money laundering.
This includes identifying when a beneficial owner, buyer or seller is a politically exposed individual, or a close associate or family member of one.
These are people which are entrusted with conspicuous public functions (such as senior politicians or their close associations and immediate family) held abroad or in Britain, as their position can make them liable to corruption.
The Directive also states that enhanced due diligence is required when conducting transactions involving high-risk third world countries, as dictated by the European Commission. This includes countries such as Iran, North Korea, Afghanistan, Iraq and Syria.
– Elect a money laundering officer
An MLRO, or Money Laundering Reporting Officer, will receive reports from staff of any suspicious activity, and will pass reports onto the National Crime Agency.
– Train staff
The regulations may dictate that staff should be regularly trained to recognise terrorist financing and money laundering risks.
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