AML Risks for Estate Agents: The Bigger Picture

Compliance isn’t just a box-ticking exercise. The real-world consequences of getting anti-money laundering (AML) compliance wrong go far beyond an HMRC fine.

First and foremost, as an estate agency business, you are legally required to comply with the Money Laundering Regulations (MLR 2017). It’s not optional; it’s a legal obligation. If HMRC, your supervisory authority, inspects your business and finds your AML framework or Customer Due Diligence (CDD) procedures lacking, you could face a significant financial penalty.

But did you know HMRC can go beyond financial penalties? The maximum sentence for breaching the Money Laundering Regulations is two years’ imprisonment. While no estate agent has been jailed yet, there has already been a prosecution resulting in a ban from operating and a community service order.

Understanding the Risks

What else should you consider when deciding whether to proceed with a transaction?

While a two-year sentence for non-compliance is serious, it pales in comparison to the potential 14-year maximum jail sentence for committing an actual money laundering offence. Under the Proceeds of Crime Act 2002, estate agents must not facilitate the laundering of funds if they know or suspect that they originate from criminal activity. Becoming involved, even inadvertently, in an arrangement that involves illicit funds could result in investigation or prosecution by law enforcement.

How to Protect Yourself and Your Business

The best protection is prevention. Ensuring there is no reason to be suspicious about a transaction means conducting thorough Customer Due Diligence (CDD), and where necessary, Enhanced Due Diligence (EDD) on higher-risk clients such as Politically Exposed Persons (PEPs). Truly knowing your customer, verifying identity, understanding the source of funds (SOF) and beneficial ownership (UBO) allows you to stand confidently behind each decision and demonstrate a risk-based approach to compliance.

Reputation: More Than Just Compliance

In such a competitive industry, maintaining a strong reputation is essential. No one wants to appear on HMRC’s public list of businesses that have received AML penalties, but it’s just as important to think beyond that. Your reputation is one of your most valuable business assets.

When faced with a higher-risk situation, even if you have met all your legal and regulatory requirements under MLR 2017, take a moment to think about the bigger picture. How could this decision impact your reputation?

Having a Defence Against Money Laundering (DAML) does not necessarily protect you from reputational damage in the eyes of the public, the press, colleagues, or even conveyancing solicitors. What if others refuse to engage in a transaction due to perceived risk? How might that influence future business relationships or referral opportunities?

Monitoring Risk: Staying Alert

Before proceeding, also consider what happens if something changes. How often are you reviewing and updating your risk assessments? This should always be proportionate to the level of risk. Ongoing monitoring, with increased frequency for clients assessed as medium or high risk, is essential.

For example, updating CDD and maintaining accurate records for at least five years are legal requirements under the Money Laundering Regulations. Failing to do so can result in HMRC enforcement action, financial penalties, and reputational harm.

Maintaining AML compliance is not just about avoiding penalties; it is about protecting your business, your clients, and your licence to operate confidently and securely in the UK property market. If you need support with any of the above, reach out here.