Property sector could face increase in workloads and costs
The UK property sector is being urged to get to grips with the 4th EU Anti-Money Laundering Directive in order to avoid facing a significant financial penalty.
Having domestically come into force earlier this week, the Directive, along with powers under the Criminal Finance Act 2017, is set to have a serious impact on the UK property industry. Due diligence on both buyers and sellers will need to be stepped up by banks and estate agents – slowing transactions down by an estimated 186 days. Additional formal risk assessments will be required under the new Directive, along with the re-appointment of nominated officers if not an executive sitting on a board at present.
According to a legal and professional services firm, Gordon Dadds, the new measures will result in workloads significantly growing. As policies will now need to be specifically tailored to the client case at hand, administrative tasks are set to increase, in addition to the amendment of the terms of business. This increase in workload will be reflected by the rise in company cost; specialist staff training and recruitment of new staff is bound to be required to offset the growth in work.
For the largest estate agents, Gordon Dadds estimate that this cost could reach a combined total of £6million.
Commenting on the potential impact of the Directive was Alex Ktorides. The Partner at Gordon Dadds highlighted the changes it will bring for those in the regulated sector, especially in regard to assessing the individual needs of the consumer.
“The Directive is a shake-up of the way that banks, estate agents and other parts of the regulated sector apply a risk-based approach to customers. They will now have to consider the characteristics of the customer, the product and its distribution and the jurisdictions involved in determining the lengths that they have to now go to in terms of conducting due diligence on their clients. There is even a new requirement to force overseas branches of UK parent companies to apply UK standards. This will cause huge concerns to international businesses and even encourage moving head office from the UK. ”
He went on to mention the importance of the sector getting to grips with the changes fast, despite the little warning that was given.
“The property sector now has to act quickly in order to ensure it complies with the Directive. The purchasers and the seller are both now included in the application of customer due diligence, meaning additional checks will need to be carried out by estate agents, auctioneers and surveyors.
“This is going to create substantial challenges for the property sector especially given the final version of the directive has only been made public today which has left no time for banks, estate agents and the lending sectors among others to update their policies and processes alongside training staff on the new regime. Some agents have in excess of 100 branches and have received no prior time to implement the new processes in order to comply.”
Ktorides also drew attention to the possible consequences of non-compliance, an issue he said would be prevalent for smaller businesses.
“For many smaller estate agents (and surveyors) this will be the first time they will have carried out checks on both the buyers and sellers and they are going to have to get up to speed with the regime as quickly as possible or risk facing an unannounced visit from the HM Treasury.”