Agents warned over HMRC probes if they use old-fashioned ID checks

25 May 2021 | Renting

Agents warned over HMRC probes if they use old-fashioned ID checks

An anti-money laundering PropTech consultancy claims agents are in serious danger of non-compliance with new regulations, unless they ditch paper documents and embrace a digital solution.

As the June 10 deadline approaches for lettings and estates agents to register with HMRC to ensure compliance, there are concerns that some are not yet prepared for the extra regulatory requirements, instead relying on what the company – SmartSearch – calls “outdated methods of ID verification.”

It says that in addition to the HMRC deadline next month, many agents are still having to work through the requirements of the fifth EU Money Laundering Directive which came into force almost 18 months ago.

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To add to it all, the company claims that the pandemic has led to an increase in attempted money laundering.

John Dobson, chief executive of SmartSearch, says there needs to be much greater awareness of the flaws in the practice of checking hard copy documents in the customer onboarding process, which he says is wide open to fraud. 

In addition, the UK government has enshrined in legislation the need to use electronic forms of verification wherever possible.

“The increase in organised criminal activity using the property sales market to flush through its dirty money has been widely reported But also, we’re seeing reports of serious spikes in fraud in the rental sector, where criminals are using fake IDs to rent accommodation as a base for their nefarious activities” he says.

“This is being allowed to continue because agents are still relying on manually checking somebody’s passport or utility bill as part of the customer onboarding process. But criminals are turning out highly sophisticated forgeries of these documents which, in a sector as busy as it has been this past 12 months, are not undergoing the necessary scrutiny.

“So, if agents really want to ensure they are compliant and want to prevent fraud and money laundering attempts, they need to accept that documents are dead when it comes to ID checks.

“A digital solution scanning global databases and lists for sanctions and politically exposed persons is far quicker with individual checks being carried out in two seconds. It is more accurate, cost-effective and ensures compliance as it updates client details automatically.”

Dobson also wants the regulator, the Financial Conduct Authority, to raise awareness of the potential benefits of technology over manual methods of verification.

This post has originally been featured in Letting Agent Today.