A New AML Register for Property Firms: The Register of Overseas Entities

Posted on August 18, 2022
Written by Errol Carter

On August 1st, the UK Government released a new public property register to attempt to put a dent in the £100bn of ‘dirty money’ that gets laundered through the UK every single year. The Register of Overseas Entities requires any overseas companies seeking to acquire property in the UK to disclose and share its beneficial owners. 

It’s fair to say that the recent conflict in Russia has been a catalyst for this decision but ultimately it has sped up the process. Since 2018, the 5th Money Laundering Directive has required all property agents and auctioneers to have procedures in place, to not only prevent money laundering but also anticipate them.

The new register will have a grace period of 6 months until January 2023 for organisations to get their affairs in order. This also applies to all retrospective purchases in the UK from the last 23 years to 1999, whereas purchases in Scotland will have to be backdated to 2014. These purchases need to have legacy checks and be inputted correctly into this new register.

The Register of Overseas Entities requires overseas entities that are seeking to own or acquire property in the UK to register with Companies House. Anonymous individuals will no longer be able to hide behind parent or shell companies. These can be to hide any Sanctions, Adverse Media or PEPs against the individual in question, for example a Russian oligarch. The UBOs for organisations must be identified and registered as part of this new legislation.

What is a UBO, a PEP & Sanctions?

  • UBO: An Ultimate Beneficial Owner is someone who has 25% or more ownership and/or voting rights within an organisation.
  • PEP: Politically Exposed Person can be deemed as someone who is high risk due to their public profile, such as MPs.
  • Sanction: Economic or financial sanctions placed on an individual, organisation or country by another country as a form of punishment such as those placed on Russia in response to its invasion of Ukraine.

As part of the Register of Overseas Entities, organisations and individuals who do not declare the UBO of property purchases will face up to 5 years in prison and a daily fine up to £2,500, that’s just shy of £1 million a year!

Anti-Money Laundering (AML) for Property and Real Estate Transactions

Did you know that two-thirds of estate agents are unaware of their AML obligations? And that all suspicious activity needs to be reported to the National Crime Agency, not HMRC. It comes as no surprise then that the property & estate agent sector has the second worst compliance out of all the industries in the UK! The largest fine issued was an eye-watering £266,783. 

What comes as an even bigger shock is that of the 30 property companies that were most recently fined, 40% had refused help with their AML and compliance processes. With one company being fined £52,000 for not registering with the government in time. Other fines include £15,000 for not completing their Client Due Diligence, or having adequate policies and procedures in place for their compliance checks.

These companies will now go on a publicly registered list for failing to comply with Anti-Money Laundering legislation.

Financial services has been the worst offending sector since 2007, with non-compliance fines standing at £36.2m. Estate agency has seen a total of £563,361 issued in fine 2017, with the biggest fine sitting at £266,793. The sector’s proportion of fines issued sits at 21%, the second largest of any sector.

Today’s Conveyancer, 2022

With the AML burden likely to increase and become more intense over the years, how can companies who have little to no experience or knowledge in this area stay compliant with all the new legislation?

That is where NorthRow can help. 

Technology solutions like NorthRow are simple and easy to use. They are designed so that someone with no previous experience with AML or compliance can effectively complete compliance checks in line with all legislation and regulations, avoiding fines and criminal charges.

All of NorthRow’s support staff are experienced in compliance and are always just a call away for any questions you might have. NorthRow automates compliance, regulation and onboarding processes for property professionals in a one-stop case management tool.

These checks can include AML, KYC/KYB, ID&V with ongoing remediation on PEPs, Sanctions & Adverse media.

The average buyer/seller of property/land completes an average of 5.4 checks during the process. These include:

  • AML checks to ensure the money is from a legitimate source
  • ID&V checks to ensure the individual is who they say they are and no stolen/fraudulent passports or identity fraud is taking place
  • HM Treasury sanction checks
  • PEPs & Sanctions to see if there are any international sanctions on an individual
  • CCJ checks are put in place to see if you owe money and a court has ordered you to pay it back as these affect your credit score rating

All of these checks NorthRow can complete autonomously and give you the results in an easy to read and access PDF document. Imagine the ease of use for your organisation and the seamless experience for the customer undertaking the transaction.

If you or your organisation has sold property to a foreign individual or organisation or are unsure if you are in compliance with the latest legislations including the Register of Overseas Entities, please reach out for a chat. You can schedule a 15-minute call with me using the link below or contact me directly for more information on errol.carter@northrow.com.