Money laundering regulations to affect estate agents

Money laundering regulations to affect estate agents

There are new regulations coming in to place from April 2016 regarding the control of companies, this will affect the property industry as a whole. Estate agents should be taking all measures to be compliant as fines can be applied in the estate agency sector for businesses that have failed to operate correctly, these fines have been reported as high as £169,000. This new legislation may or may not come as a surprise, as it seems the property industry is becoming heavily regulated, which will hopefully see easier compliance and those that do not comply penalised.

The Small Business, Enterprise and Employment Act is introducing new law that will have a direct impact on companies, shareholders and beneficial owners. The new requirements will apply to all UK companies, except those which as subject to specified separate disclosure requirements. There are two significant changes applicable to the estate agency sector.

1. PSC Register

For businesses that operate as limited companies and LLPs they need to create and maintain a Person with Signifcant Control (PSC) register. This means that companies must maintain a register containing specified particulars of any person with significant control over the company as well as detailing the nature of the control that person has. Companies will need to hold their own PSC register from this April. In addition, any relevant legal entity (RLE) will need to be included on the register. The register must be kept at the companies registered office and be available for inspection at no charge. From June 2016 a company must also provide details from its PSC register to Companies House, this ties in with the implementation of the European Union’s Fourth Money Laundering Directive in 2017.

2. Identification Checks

Identity checks under Money Laundering Regulation requires the PSC register to assist in identifying those when a company is involved. The PSC register held by the company must include details such as their name, residential address, service address, date of birth and the details concerning the significant control over the company. Not of all this information will be made publicly available.

The concept of a person with significant control is broad and includes any person who:

  • directly or indirectly holds more than 25% of the shares in the company
  • directly or indirectly holds more than 25% of the voting rights in the company
  • directly or indirectly has the power to appoint or remove the majority of the board of directors of the company
  • has the right to exercise or actually exercises significant influence or control over the company
  • has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the above first four conditions over the company.

To summarise, the government’s aim is that by April 2017, Companies House should hold a PSC Register for all UK companies affected by the new legislation. Companies must be proactive when it comes to identifying people that should be included on the companies PSC register, if companies do not comply the directors can face criminal liability. As the legislation is being rolled out over the course of a year, the full impact on businesses is currently unknown, however, experts are saying companies should be putting procedures in place so that they are able to comply in time.

Published: February 16, 2016