Regulations introduced this week require estate agents to carry out customer due diligence checks on buyers, as well as sellers, in efforts to combat corruption in the London property market.
Last summer a report from the Home Affairs select committee criticised the lack of sufficient supervision in the industry. London property has always been an attractive prospect for money laundering purposes because it is perceived as a safe investment meaning large transactions can be made anonymously via companies registered offshore. Whilst many transactions using offshore companies are done so for legitimate privacy reasons, the lack of transparency means those using them for illegal purposes can go unidentified. New rules suggest the Government is aiming to crack down on terrorists and criminals funnelling money through the UK’s financial system.
These new rules are part of the EU’s Fourth Money Laundering Directive and applicable to the UK, which is a member state of the EU until 2019. Corporations will need to scrutinise any unusually large or complex transactions, particularly those involving either parties’ anonymity. They will also be responsible for identifying and reporting suspicious activity to the police.
As estate agents will be entering into a business relationship with the buyers as well as the seller of the property they must undertake thorough customer due diligence (CDD) checks on both parties in the transaction to ensure that payments are coming from a legitimate source.
It is not just first time buyers being priced out of the market due to inflation that suffer. Leaseholders and homeowners can be affected when properties are bought with questionable funds. Whilst the regulations may slow down the transaction process, the additional actions should lead to greater security for homeowners.
Derek Payne handles a broad spectrum of property work, based upon a core of conveyancing of residential and commercial properties. He acts for a wide variety of clients from private individuals and offshore investors to corporate entities and developers.
For information on these matters please contact him
