Developers are exempt Money Laundering Regulations, estate agents are not

Aniti-money Laundering:

Developers selling homes through their own on-site sales offices are exempt Money Laundering Regulations (AML), whereas if an agent is selling, then they would not be.

Property Industry Eye reports that this situation would seem anomalous, but HMRC has confirmed to the Eye that this is indeed the case.

It seems that developers, as far as HMRC is concerned, are classed as private sellers of peer to peer sellers, and like them, they are not expected to be compliant, they are not caught by the AML regulations.   

A query about this emerged after a buying agent, purchasing a property from a developer on behalf of a client, was told that AML applied to him, whereas not to the developer.

HMRC told the Eye:

“If an individual or company sells property they own to an individual that they find themselves, this is a private sale and does not involve an estate agency.

“If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.”

The full response from HMRC was this:

The Money Laundering Regulations are about supervising certain specific businesses conducting relevant activity. This includes estate agencies.

The definitions of estate agency businesses and what is relevant activity are defined in the Estate Agents Act 1979. This legislation is owned by NTSELAT (the National Trading Standards Estate and Letting Agency Team). Owners of property and peer to peer sales of said property are not covered in this definition.

If an individual or company sells property they own to an individual they find themselves, this is a private sale and does not involve an estate agency. If it is a different company that introduces the parties for sale/purchase, then this business is classed as an estate agency and must be registered for AML supervision.

A new EU directive from June 2017, cited by the Eye, states that agents entering into a business relationship with both sellers and buyers requires agents to scrutinise buyers’ finances. This would include auctioneers who are required to check out all potential purchasers before giving them a paddle so that they can bid for a property – but developers, it seems, are exempt when they use their own sales teams.

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