HMRC UPDATE THEIR MONEY LAUNDERING GUIDANCE

We had 2 consultation versions of the guidance in May and then a published version on 26th June to correspond with the change in legislation. That 3rd version didn’t appear to have changed much, if at all from the consultation versions, which was a surprise, given the multitude of problems with the document and the number of comments that were sent in.

This 4th version published earlier this week is better but still has obvious problems, not least because they still haven’t got the clause numbering correct.

In general terms there are quite a few additional management obligations on agency businesses, but at a day to day level the new changes mean agents and staff need to focus on client risk assessments before conducting customer due diligence (CDD) and focus on conducting CDD on buyers.

HMRC do appear to be softening in their approach to conducting CDD on buyers. They have now at least accepted that the obligation only exists where a buyer exchanges on a property, but they do expect agents to conduct CDD at the point the Memorandum of Sale is issued.

Still on the issue of buyers, there might be some more good news, because there is a change in the guidance which now states that agents must terminate a business relationship with a buyer, if the buyer “indicates they are not prepared to prove who they are”.  We all know that not many buyers will indicate they are not prepared to prove who they are, but there will be some who will not be rushing to your door to provide the documents. Potentially a softer approach!

However, they still don’t grasp the problem of terminating a business relationship with the buyer, if the buyer refuses to provide ID. Agents have no business relationship with a buyer and so it is not possible to terminate it! I have asked more than once for them to clarify how an agent would prove they had terminated their relationship, but no response so far.

Unfortunately, it looks like they haven’t got their heads around the legality of agents running a sealed bid process either; they require agents to conduct CDD on all sealed bidders, when at best only one will end up as buyer and in many cases none of the bidders end up buying!

Auctioneer obligations continue to be a bone of contention because the guidance states that auctioneers should conduct CDD on all bidders if they charge a fee for the privilege of bidding, because that will mean they have a business relationship with the bidder. Whilst that is correct the business relationship is not a regulated activity and so it is not until a bidder buys a property that a regulated activity starts and thus the need to conduct CDD.

The guidance still states that auctioneers should conduct CDD on the buyer before the hammer falls. This means it will need to be done on all bidders, even if no charge is made, because the auctioneer has no idea who the buyer will be until the hammer falls.

I also believe that HMRC must provide advice to agents on how they handle the personal data they receive from potential buyers, because the five year retention obligation does not apply where agents take buyers personal information, but that person does not buy the property!  This will become more important when the General Data Protection Regulations come into force next year.

We await the next version!

David's Philosophy

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