Changes to ML regulations for letting agents could see more agents fall foul of AML fines as they struggle to keep up with the changing face of the lettings sector, according to AML platform, FCC Paragon.
As of 14 May this year, new financial sanctions reporting obligations will come into force requiring letting agents to conduct far stricter AML checks.
These regulations will require agents to verify the identity of tenants and landlords, check that they don’t appear on the UK’s financial sanctions list, report any suspected money laundering or suspicious financial activity and, most significantly, monitor and report all tenancy agreements regardless of rental value.
The latter is the most significant change, as currently, reports are only required where the monthly rent paid exceeds 10,000 EUR per month (£8,300).
Analysis of current rental market listings by FCC Paragon shows that, across the UK, just an estimated 2.5% of all rental listings currently boast a monthly asking rent of 10,000 EUR (£8,300) or more, demonstrating the huge increase in red tape that could come as a result of the latest changes to AML reporting requirements.
The most recent government figures show that estate and letting agency businesses were fined to the tune of £3m in a single year as a result of 468 AML breaches, with the average (median) fine coming in at just over £4,000.
Whilst changes to vet every rental agreement created should, in theory, provide greater protection across the board, the huge increase in resource required to remain AML compliance could see many agents struggle and actually lead to an increase in AML fines issued.
The managing director of FCC Paragon, Bekki Leaves, commented: “The changes to anti-money laundering protocols are, for the large part, a positive that should provide a far greater degree of protection to landlords at all levels of the market.
“There’s no doubt that illegal practices aren’t refined to properties with asking rents of 10,000 EUR or more and so greater protections at all levels of the market should help to crack down on criminal activity.
“However, there’s a good chance that AML fines could climb, at least initially, as letting agents struggle to get to grips with the huge increase in the resources required to stay AML compliant.
“It’s vital that they take a proactive approach if they want to avoid what can be hefty fines and the best place to start is to assess their onboarding and monitoring processes, whilst establishing clear reporting channels.
“Investing in third party help is likely to be paramount as they will no longer be able to process the paperwork required by utilising outdated methods such as manual checks. ID verification software and AML compliance platforms are well worth the investment if it means staying AML compliant and avoiding the wrath of the FCA.”
Read the orginal article: https://propertyindustryeye.com/letting-agents-face-major-task-in-remaining-aml-compliant-with-hike-in-fines-likely-from-may/
