An anomaly has emerged by which developers selling homes on their own sites do not have to be registered for anti-money laundering purposes – but any estate agent selling those very same homes must be.
Developers who set up their own staffed sales offices on sites do not have to worry about money laundering and have no responsibilities for checking out dodgy transactions. They are regarded as peer to peer, or private, sellers.
However, if they use agents either to staff their sales offices or handle sales then money laundering regulations do apply.
The issue has emerged after a buying agent told EYE that he had agreed a purchase on a new development on behalf of a client.
When he asked if the developer needed to check out both the purchaser and himself for AML purposes, he was told no.
The agent told us: “As a buying agent who neither sells nor lets nor handles any client’s monies, I am classed by HMRC as an estate agent for money laundering purposes.
“If I am regarded as someone who might ‘money launder’ my clients, why should a residential property builder not be?
“Surely the residential property builder with a sales team is acting as an estate agent and selling properties?”
EYE put this to HMRC, which supervises estate agents for money laundering purposes.
A spokesperson told us: “If an individual or company sells property they own to an individual that they find themselves, this is a private sale and does not involve an estate agency.
“If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.”
In the early days of anti-money laundering supervision, estate agents were told to do due diligence on their customer – which many took to mean only the seller who paid them. It may be that developers were exempted because if they sold their own homes, they would have been doing customer due diligence on themselves.
However a new EU directive in June 2017, treats agents as entering into a business relationship with both sellers and buyers, and requires agents to scrutinise buyers’ finances. The regime includes, for example, auctioneers who are required to check out all potential purchasers before giving them a paddle so that they can bid for a property – however, developers seem to have been omitted if they use their own sales teams.
The full response EYE received from HMRC was this:
- The Money Laundering Regulations are about supervising certain specific businesses conducting relevant activity. This includes estate agencies.
- The definitions of estate agency businesses and what is relevant activity are defined in the Estate Agents Act 1979. This legislation is owned by NTSELAT (the National Trading Standards Estate and Letting Agency Team). Owners of property and peer to peer sales of said property are not covered in this definition.
- If an individual or company sells property they own to an individual they find themselves, this is a private sale and does not involve an estate agency. If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.