{"id":8929,"date":"2020-03-02T14:59:37","date_gmt":"2020-03-02T13:59:37","guid":{"rendered":"https:\/\/www.lettingaproperty.com\/landlord\/blog\/?p=8929"},"modified":"2024-07-15T16:49:48","modified_gmt":"2024-07-15T15:49:48","slug":"fifth-money-laundering-directive","status":"publish","type":"post","link":"https:\/\/www.lettingaproperty.com\/landlord\/blog\/fifth-money-laundering-directive\/","title":{"rendered":"How Does the Fifth Money Laundering Directive Impact Landlords, Tenants and Agents?"},"content":{"rendered":"\n

If you keep up to date with the latest goings-on of the private rental sector, you\u2019ve probably came across the Fifth Money Laundering Directive several times over the last couple of months. But what exactly is<\/em> the Fifth Money Laundering Directive? And what does it have to do with rental properties?<\/p>\n\n\n\n

What is the Fifth Money Laundering Directive?<\/strong><\/h2>\n\n\n\n

The Fifth Money Laundering Directive \u2013 known as the Money Laundering and Terrorist Financing (Amendment) Regulations 2019<\/a> in the UK – aims to combat against terrorist financing, financial crime and money laundering. <\/p>\n\n\n\n

The directive is essentially an amendment to the EU\u2019s Fourth<\/em> Money Laundering Directive that introduced a stricter risk-based approach to money-laundering in the UK \u2013 know as the Money Laundering Regulations 2017.<\/p>\n\n\n\n

How will\nthe Fifth Money Laundering Directive affect the rental sector?<\/strong><\/h2>\n\n\n\n

The Fifth Money Laundering Directive came into force in the UK on January 10, 2020. From this date, all letting agents who manage any properties with an individual rental yield of 10,000 Euros a month<\/strong> (approx \u00a38,718.45 as of time of writing) must comply with the regulations.<\/p>\n\n\n\n

The regulations require that any legible agents or property management companies carry out comprehensive customer due diligenc<\/strong>e on any landlord or tenant involved in a tenancy with a <\/strong>monthly rent of 10,000 Euros or more. Properties with a monthly rent of 10,000 Euros are quite uncommon in the UK, making likelihood of letting agents falling under the scope of the Fifth Money Laundering Directive relatively low. <\/p>\n\n\n\n

All letting agents that meet these requirements must take appropriate steps to assess the risks of money laundering and appoint a Money Laundering Reporting Officer<\/strong> who is responsible for the company\u2019s compliance with the regulations. <\/p>\n\n\n\n

What is<\/em> money laundering and how are rental properties at risk?<\/strong><\/h2>\n\n\n\n

To put it\nsimply, money laundering is the illegal process of disguising the origins of\ncriminally obtained money \u2013 otherwise known as \u2018dirty\u2019 money. The money is\npassed through a sequence of transactions and eventually returned to the\nlaunderer from a seemingly \u2018legitimate\u2019 source.<\/p>\n\n\n\n

Purchasing\nand letting out a property is a common way for criminals to launder their money\nin the UK. The large sums of money and single transactions that are often\ninvolved with property give criminals an ideal chance to swap their dirty money\nfor clean cash without rousing suspicion. <\/p>\n\n\n\n

A property owner may attempt to launder their money by \u2018letting\u2019 out their property to someone who\u2019s in on the crime – or even creating a made-up tenant – and disguising their dirty money as clean rental payments. Similarly, a tenant (with no association with the landlord) may launder illegal cash by using it to pay the rent or by using it to pay a security deposit that will eventually be returned clean.<\/p>\n\n\n\n

What anti-money laundering responsibilities do letting agents have?<\/strong><\/h2>\n\n\n\n

Estate agents and companies that carry out property sales <\/strong>have been required to comply with the Money Laundering Regulations and register with the HMRC since 2017<\/strong>. Letting agents will have to register with the HMRC when the online system becomes operational in May 2020<\/strong>. Letting agents that also carry out sales should already be registered, but should inform HMRC<\/strong> that they carry out lettings when the online registration system is available in May 2020.<\/p>\n\n\n\n

Although letting agents can\u2019t register until this date, they must comply<\/strong> with the regulations in every other way.<\/p>\n\n\n\n

All members of staff should be made aware of the Money Laundering Regulations<\/strong> and the consequence responsibilities <\/a>they have to fulfil. Relevant training should be given, a regular risk assessment should be carried out and a written policy on how to manage the risks of money laundering should be available.<\/p>\n\n\n\n

Thorough customer due diligence (CDD) should be carried out on landlords and tenants involved in the specified agreements. This should include verifying the identity of the landlord<\/a> (and the tenant<\/a>) and gaining information about the purpose of the business relationship ahead. <\/p>\n\n\n\n

Any suspicious activity \u2013 including that of colleagues – should be reported to the Money Laundering Reporting Officer (MLRO)<\/strong> and not shared with other members of staff.<\/p>\n\n\n\n

Between 2010 and 2018, call centre leader Haroon Cassim took almost \u00a31.5 million<\/strong> from Camelot and Yopa Property. Whilst working for the two companies, Mr Cassim used fake invoices from bogus businesses to transfer between his wife\u2019s accounts. His wife is now on trial<\/a> for three accounts of money laundering.<\/p>\n\n\n\n

What are\nthe responsibilities of letting agents beyond <\/em>Fifth Money Laundering\nDirective?<\/strong><\/h2>\n\n\n\n

As a landlord or tenant, you may be wondering what if I use a letting agent that isn\u2019t required to register with the HMRC? What anti-money laundering responsibilities do they <\/em>have that will protect me?<\/p>\n\n\n\n

Letting agents have a general responsibility<\/strong> to carry out customer due diligence and protect their landlords, tenants and business from financial crime, money laundering and fraud.<\/p>\n\n\n\n

As an online company, all our interactions with landlords and tenants are via phone calls or emails \u2013 meaning we are especially vigilant when it comes to the verification of identity<\/a> and legitimacy of transactions. <\/p>\n\n\n\n

As expected\nof all lettings companies, we will not \u2013 in any circumstances \u2013 advertise a\nproperty on behalf of a landlord without formal authentication of their\nidentity. We will ask landlords to provide: <\/p>\n\n\n\n