As new anti-money laundering changes kick in, we take a look at what you need to know about the Fifth Money Laundering Directive.
On the 10th January 2020 the Fifth Money Laundering Directive, also referred to as 5AMLD, came into force across the EU. For those working in regulated sectors such as Estate Agents, the requirements of 5AMLD will have to be met and failure to do so could incur significant penalties. For now, Brexit has had no effect on the UK’s adoption of the 5AMLD legislation.
So what is the Fifth Money Laundering Directive?
The Fifth Money Laundering Directive is a series of amendments to the structure of the Fourth Directive, that came into effect in June 2017. The main changes are focused on enhanced powers for direct access to information and increased transparency around beneficial ownership information and trusts.
5AMLD brings about the following changes:
- Regulating virtual currencies and pre-paid cards to prevent terrorist financing
- Improving safeguards for financial transactions to and from high risk countries
- Ensuring centralised national bank and payment account registers or central data
retrieval systems are accessible in all member states
How does the 5AMLD impact Estate Agents?
Whilst most businesses have standard compliance processes in place, 5AMLD is a reminder that Estate Agents especially need to continually evolve their processes in line with changing legislation.
The amendments have little impact on an Estate Agent’s day to day actions regarding customer due diligence. However, online electronic verification of identity reports is now formally recognised as a reliable source which is independent of the person whose identity is being verified.
This route is useful to confirm a person’s identity in lower risk situations and useful when enhanced due diligence is required. It is particularly useful for confirming whether a person is politically exposed or on the Treasury’s Financial Sanctions List, but the use of electronic verification systems is not a mandatory requirement on agents.
Enhanced Due Diligence
The changes outline additional steps to be taken where enhanced due diligence (EDD) must be carried out on sellers or buyers who are residents in one of the countries assessed by the EU as ‘high risk third countries’, (currently 16 such countries).
The amendment states that any regulated Letting Agent must carry out customer due diligence on landlords, tenants, guarantors and permitted occupiers of those properties in relation to any type of tenancy or rental agreement that is for a term of one month or more, where the monthly rental amount on an individual rental agreement is equivalent to 10,000 Euros (which is equivalent to approximately £8,500) or more.
Our advice to agents that fall into this category, would be to start:
- Obtaining the title register document to confirm ownership;
- Conducting a simple risk assessment on all the parties;
- Conducting appropriate customer due diligence on all the parties, depending on the risk assessed;
- Requesting confirmation from tenants on the source of the funds being used to pay the rent.
As a regulated Letting Agent you must also register with HM Revenue & Customs for Anti Money Laundering supervision, in the same way, Estate Agents that deal in sales have been doing for some years. Estate Agents must notify HMRC of their lettings trade which is just simply an amendment to your existing current registration to include lettings, at your renewal date.
Businesses that are solely Letting Agents must complete the following tasks;
i. Ensure the principals, directors or partners obtain approval from HMRC to act in such a capacity, just as those individuals within estate agency businesses have done since the 2017 regulations were introduced; &
ii. Ensure the business registers with HMRC.
Don’t get caught out over non-compliance
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