Property Market News: HMRC issues £3.2 million in money laundering penalties

Property Market News: HMRC’s Latest Fine List Totals £3.2M
Written by Caroline Walters, Lead AML Consultant, FCS Compliance

HMRC has published details of the latest businesses fined for breaching anti-money laundering (AML) rules.

The HMRC list, which includes the publication of estate agency fines, shows that the sector accounts for the largest number of AML fines issued. And the numbers are on the rise. Accounting for almost half (45.4%) of all fines issued, they’re at the highest level seen since the introduction of AML supervision back in 2017.

Reading the report it is clear that agents are simply failing to comply with the basics of AML legislation.  HMRC state the breaches included failing to apply for registration at the required time; failures in carrying out risk assessments, having correct policies, controls and procedures in place; conducting due diligence and record keeping; and failures in the provision of registration and information.

The most recent updates to legislation and guidance places more responsibility on agents to ensure registration information is accurate and timely.

For example, one section of the updated guidance relating to trusts stipulates that most trusts need to register on the UK Trust register even if they are non-UK in their origin.  This means that agents must retain a copy of the trust registration and ensure the information on this registration matches the information provided on the Deed of Trust.

A company’s policies and procedures should take into account all the recent updates and demonstrate an understanding of the laws around money laundering.  A firm-wide risk assessment should include the risks appropriate to its business and the mitigation they put in place to counter those risks. Remember these documents must be reviewed and updated to reflect any changes throughout the year or at least annually – whichever is sooner.

HMRC guidance states that senior managers must monitor the effectiveness of the business’s policy, controls and procedures and make improvements where required.  An independent audit is a good way to implement this.  This will ensure that not only are a business’s policies & procedures correct and up to date but that customer due diligence files have been independently checked too. This demonstrates that thorough and comprehensive due diligence has taken place.  An independent audit from FCS can identify training needs, upgrade documents and provide the reassurance that a business is HMRC-ready.

HMRC has a range of enforcement powers that it can use for businesses which do not comply with the Money Laundering Regulations, including civil penalties, criminal proceedings and removal from the register.  Any of these sanctions can be used in combination.  HMRC can:

• issue a financial penalty
• issue a censuring statement
• impose a prohibition on management of a relevant business upon a person
• suspend a registration
• cancel a registration
• decide that a relevant person in a business is no longer fit and proper, which will lead to either a prohibition on management, or suspension or cancellation of the business’ registration
• obtain a court injunction
• refer a case for criminal investigation and potential prosecution

Outsourcing AML and staff training can save valuable time. An independent audit provides the reassurance that a business is compliant, while regular file reviews will establish that customer due diligence is accurate.  And of course, an audit will identify any firm-wide improvements that need to be made.

^{Further reading:}

^{https://www.gov.uk/government/news/hmrc-issues-32-million-in-money-laundering-penalties} 

^{https://thenegotiator.co.uk/watch-out-hmrcs-about-as-estate-agency-aml-fines-start-to-rise/}