Have letting agents really been let off the 4MLD hook?

money-laundering-1240633

The real benefit of plastic bank notes becomes clear

The Fourth Money Laundering Directive – or 4MLD as those trend setters in the Treasury like to say – is apparently not to include letting agencies, so long as their activity is confined to ‘lettings’ and not estate agency services.

Back in March 2017 HM Treasury published its response to one of the many consultations focussed on transposition of 4MLD. This particular consultation looked at four areas of specific interest related to estate agency:

  • The appointment of professional or self-regulatory body supervisors of estate agents
  • Lettings activity
  • Application of customer due diligence
  • Sub agents and reliance

The important point for UKALA members is that, in a change of scope from 3MLD, the fourth iteration states that “estate agents could be understood to include letting agents where applicable”.

Previously, only those agents also undertaking estate agency business were within scope.

However, this fairly innocuous statement opens up a whole range of different interpretations, based on what is meant by ‘where applicable’ and ‘letting activity’. As a consequence it was widely expected that all letting agency businesses would find themselves in-scope of the regulations. On the face of it this seemed inevitable, and was even welcomed by other agency representatives on the basis that it would capture a great many more transactions and (potentially) introduce some welcome clarity.

The much less welcome aspect to 4MLD, so far as letting agents were concerned, was the potential cost of compliance – especially at a time when cash flow looks likely to take a major hit from the banning of letting fees to tenants.

That doesn’t sound good

Fortunately, and somewhat surprisingly, it looks like letting agents (who do not also conduct sales related business) will fall out of scope. Explaining the move, the Government stated;

“While it should be noted that the majority of respondents to the consultation supported the inclusion of letting agents within the regime, intelligence and evidence was not provided to justify the inclusion of lettings activity and the attendant costs of this proposal for those affected. The government will only “gold plate” where there is good evidence that a material ML/TF risk exists”. 

So we’re in the clear then?

Yes.

Probably.

Hopefully.

So far as we know letting agents will be excluded, but yet another consultation is underway and it does seem a little out of character for the Treasury to side with the industry.

The directive must be transposed into UK law by late June 2017, and it looks like the fact that Parliament will be busy unravelling lots of existing EU regulation may work in agents favour.

For those interested, the regulations which will bring this into UK law are currently out for consultation (until 12 April 2017) and can be found here: https://www.gov.uk/government/consultations/money-laundering-regulations-2017/money-laundering-regulations-2017

With luck no one will convince them to think again…..

 

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