Yesterday, MPs described estate agents as the “weak link” in the anti-money laundering regime, in a new report on economic crime from the Treasury Select Committee which called for HMRC to tighten up on ensuring that all agents are registered with it for anti-money laundering purposes.
It follows information put out this week by HMRC on anti-money laundering enforcement which should make every agent look very closely at their own compliance position.
Also of interest to agents is the new guidance from NTSEAT on disclosure of referral fees.
The focus on agents is ever increasing, as are the constantly growing number of obligations, and so compliance must move up your priority list.
Twenty-five years ago, I started out on the road of providing compliance services to agents. Back then compliance obligations were nothing like they are today and compliance was never a priority for agents, probably because the risk of being caught was slim, and even if you were, the implications were not great.
However, you can see how things have changed, because if I go back only three or four years, I was a lonely figure on our compliance stand at various events, but at this year’s NAEA conference there were five stands focusing on compliance and we weren’t one of them!
Things have definitely moved on. Obligations on agents have increased considerably and will continue to increase at a pace. Consumer protection generally has moved up the political agenda and is treated as a potential vote winner.
Add to this the changing enforcement climate, where the implications of not complying are far more damaging, and I think compliance might need to be top of agents’ to do list for a while.
The climate started to change a few years ago with the introduction of penalty notices for non-compliance with obligations.
There were a few smaller fixed penalties, but the first big one came with the Consumer Rights Act obligation to display lettings fees. The penalty here is £5,000, as quite a few agents will testify to.
The process for issuing these penalties is actually very simple for Trading Standards. They send a letter to you advising of the obligation to display fees. Months later they check your website and visit your office, and if there are any omissions they issue the £5,000 penalty. Almost all appeals have proved fruitless.
A far more important change was the closing of the Office of Fair Trading. This was the supervisory authority for estate agents (now supervised by NTSEAT) and anti-money laundering. The latter then transferred over to HMRC.
The change could not have been any worse, because HMRC is an agency that is geared up to generating income. HMRC then made the Anti-Money Laundering Section of HMRC self-funding, which would focus anyone’s mind on income generation.
You can see why the larger corporate and online agencies were targeted first – big penalties!
This week’s naming by HMRC of Countrywide as having been fined £215,000 for AML breaches illustrates this.
However, HMRC’s approach is beginning to filter down to smaller agencies and to chasing agencies which have not registered for AML – of which there are many.
I said the implications of non-compliance are now more damaging and I suspect the top brass at Countrywide probably agree, given that it is first on the new HMRC naming and shaming list and the penalty imposed was a considerable one.
However, that penalty is not the largest to have been imposed in the past and there will be bigger ones in the future.
I would recommend that all agents, no matter what size, take a pro-active and critical view of compliance.
Conduct an audit and implement improvements.
It won’t make you any money, but it will prevent damage to your business. And it could save you from being hit with very large penalties.
Property Eye contributed to this article.