Anti-Money Laundering Regulations for Landlords
In the UK Estate Agents are already required to demonstrate that they ‘know their customer’ and apply Anti-Money Laundering measures and demonstrate due diligence with all new, and continuing customers.
A draft EU Bill suggests that Letting Agents, and potentially, therefore, Landlords if they let directly, will also need to carry out Identity Checks.
What is Money Laundering?
Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of criminal acts, in an attempt to make the money lose its criminal identity & appear legitimate.
The UK government has identified the property market as a particular area for concern and has introduced the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 which came into force on 26th June 2017, with the intention of detecting, deterring and disrupting money laundering efforts and the funding of terrorism and clamp down on organised crime.
If you are using an Agent, it is their responsibility to ensure that they ‘know their customer’, and as such should be able to demonstrate CDD (Customer Due Diligence) for every Purchaser and Vendor (Estate Agents), and potentially in due course for Tenants paying over the £8,800 per rent per month (Letting Agents).
Money laundering checks have existed for many years, but these new regulations push for diligent enforcement, which is why you might find that your Agent is asking for information that you’ve already provided in the past. In particular, for Estate Agents the regulations aren’t just about doing the checks, but also proving they have done them.
Some as best practice may also ensure that their landlords (along with ensuring they own the property and have the right to rent it) will also verify your identity as their potential customer.
CDD is applied on a risk-sensitive basis, dependent on the type of customer, their business relationship and the nature of the transaction and each Agent will need to ensure they have at least verified the identity of the person they are doing business with before the establishment of a business relationship or transaction takes place.
At the point, your Letting Agent is instructed for a let, and prior to marketing the property as a minimum, the Agent will need to verify your name, date of birth and contact address. The current legislation requires that they do this through getting sight of original government-issue documents such as a passport or driving licence and checking that you’re genuinely the person these documents belong to.
If you live in a completely different part of the country to your rental property (or abroad) this can be highly challenging, but fortunately, you can provide good copies of these documents, so long as they’ve been certified by a suitable professional.
The Agent will also try and assess whether anyone else is benefiting from the business relationship, and if so, the Agent may also ask for information from them even if they’re not officially named on the lease.
Depending on each agency’s individual policy the checks may have to be a lot more detailed than this, depending on your own personal circumstances. For example, if your property is owned as part of a company, or you have an official political position or live in a country with a high incidence of corruption, then you can expect to have more detailed checks carried out. This may also be the case if you have a close family member who falls into one of these categories.
It’s the duty of each agency to risk-assess their clients before they enter into a business relationship with them and the reality is that these rules genuinely do make life more difficult for organised crime and terrorists.
Should this draft legislation be ratified and apply to Tenants, then prior to accepting an Offer where rent is greater than £8,800 per month (or on presentation of the offer to the Landlord if using an Agent) there will be a responsibility for checking a Tenants Identity.