Treasury Committee release report on Economic Crime
On 8 March 2019, the House of Commons Treasury Committee released its report on Economic Crime, and Mark Hayward, Chief Executive of NAEA Propertymark, gave evidence as part of the inquiry in June 2018 and is quoted throughout the report.
The Committee launched the inquiry last year to look at two issues. Firstly, anti-money laundering and the sanctions regime. Secondly, consumers and economic crime. This Report covers the first of these strands. A second Report covering the consumers and economic crime strand will follow later in 2019.
The Committee heard evidence on where the risks from property transactions were potentially concentrated. Mark Hayward explained that the problem was not confined to a geographical area.
“It is not just prime central London… Certainly, we have seen evidence outside London, particularly where purchases are not uncommon from overseas—particularly in university towns, whether that be Cambridge, Exeter, Bristol or Manchester. There is a very high proportion of purchases from overseas, and we particularly ask our members to be careful when it is a company and to try and find the beneficial ownership of that, and that is starting to improve now.”
Mark also noted some of the gaps in the AML supervisory regime for property:
… do not forget that we are not the only people who sell houses. House builders sell houses, and they are not even bound by the Estate Agents Act. They are a private seller. … and any of us can go out today and buy a house at auction and we don’t need an interface.
Another area of concern raised with the Committee was around how HMRC is resourced. Mark concurred with Stephen Curtis of the Association of Company Registration Agents, who noted that “HMRC’s problems probably are down to resourcing and budget cuts”.
The Report notes that one concern around HMRC AML supervision is whether it is ensuring that all firms that should be registered with it, are. When asked whether some firms were slipping through HMRC’s net, Mark Hayward told the Committee that he thought some were, and that “I know that National Trading Standards is prosecuting some of them on behalf of HMRC, but it is very difficult to identify”.
HMRC’s overall role as an AML supervisor
When the Committee asked NAEA Propertymark whether HMRC should withdraw from their areas, Mark Hayward said he “would be very much in favour of that” as it has taken HMRC a long time to get to know their sector and he felt the professional bodies would know what to look for.
An integral part of the AML regime are the rules around Politically Exposed Persons (PEPs), but Mark Hayward argued that it was quite hard for a high street agent to make such PEP assessments, given that 81 per cent of the sector are owner-managers with one to three offices. He noted that “they are small businesses and the owner is on the front desk. It is difficult for them to make that call if there was not a finite list to go to”.
The Committees’ comprehensive report outlines are number of findings and makes a series of recommendations.
- The property sector poses a risk from an anti-money laundering perspective. Yet the AML supervisory regime around property transactions is complicated.
- The Committee supports the role that The Office of Professional Body Anti-Money Laundering Supervision (OPBAS) has been given in relation to the Professional Body Anti-Money Laundering Supervisors
- With mutual evaluations occurring only on a 10-year cycle, the UK should not solely rely on prompting by FATF to ensure its economic crime prevention, detection and enforcement systems remain fit for purpose and it should not rely on FATF alone to identify areas where improvement is needed.
- The UK’s departure from the European Union will inevitably result in a change in international trading relationships. Such new trading relationships may also provide opportunities to those wishing to undertake economic crime in countries that are more vulnerable to corruption.
- The Government must urgently consider reform of Companies House to ensure it has the statutory duties and powers to ensure it plays no role in helping those undertaking economic crime, whether here or abroad.
- The Government should then also consider moving the supervisory responsibilities of HMRC to OPBAS.
- Confidence in the SARs system, at present, appears to be weak outside the core financial service. In its response to this Report, the Government should set out how it will increase confidence in the SARs regime.
- The Committee recommend that the Government creates a centralised database of PEPs for the use of those registered by AML supervisors.
Commenting after the release of Treasury Select Committee’s Economic Crime report, Mark Hayward Chief Executive of NAEA Propertymark, said:
“We unequivocally welcome today’s report on Economic Crime. As our evidence suggests, we’re aware of the risks of money laundering in the property sector and will work with Government bodies to further ensure estate agents are prepared to deal with economic crime. We endorse the committee’s recommendations and hope the Government take them seriously, especially enhancing the role OPBAS plays in the ecosystem of economic crime.”
Kindly shared by NAEA Propertymark