Agencies risk Reputational Damage - new warning to industry

Lettings agencies which rely on manual means of verification are risking repetitional damage caused by anti-money laundering regulations, a digital compliance service is warning. 

In addition, agents are wasting time on routine manual processes involving hard copy passports and photo IDs which are ineffective against sophisticated money launderers.

That’s the view of Martin Cheek, managing director of SmartSearch, who has analysed some 500 companies operating in the agency, finance, law and banking sectors. 

A quarter of the 500 admitted to verifying new customers using manual checks which could takes days or even weeks to complete - and with a third admitting they might not identify a fake anyway. 

Cheek says: “We know that money-laundering attempts are on the rise, with almost half of regulated firms reporting an increase in attempts to launder money.”

The UK government has made it a legal obligation for the business sectors defined by the Money Laundering Regulations - such as letting and sales agents, accountants, financial service businesses, and solicitors - to register for anti-money laundering supervision from HMRC, officially known as Economic Crime Supervision.

If a business covered by these regulations is deemed to have insufficient AML practices, monitoring, and precautions in place, HMRC is able to issue significant fines. 

A string of compliance service providers and experts have criticised elements of the agency industry for lax practices when it comes to anti-money laundering. 

In January Credas Technologies claimed that fines issued to agents for anti-money laundering non-compliance were getting bigger, reversing a downward trend seen throughout the pandemic.

Data for Q1 of the 2022-23 financial year shows that the average AML fine issued to agencies is £3,815.  This was six per cent higher than during the 2021/22 financial year. 

Total fines in the first quarter of the current financial year hit £304,023, equating to 44 per cent of total fines seen in the previous financial year in just a single quarter.