Another issue for Landlords to add to the learning curve.. Money Laundering.
The UK Treasury announced that they want a consultation to consider adopting the EU’s Fifth Anti Money Laundering Directive (“5AMLD”) into national law.
The exchequer is of the opinion that it may expand the current scope of 5AMLD, by targeting what is considered by them to be a gap allowing illegal funds into the property market. As such they are now considering imposing a new requirement on landlords to do extensive due diligence on their tenants to ensure the funds are from legal sources.
The 5AMLD is basically a revamp of the EU’s 4AMLD and is used to expand various definitions, including that of “obliged entities” and includes estate agents, who may be acting as intermediaries in property lettings. The difference is that unlike the 4AMLD, the 5AMLD does not differentiate between commercial and residential, therefore private landlords will also be included in rules.
The plus side, for the moment, is that it is currently based on properties that are rented at EUR 10k, or more, per month.
The concern has been that real estate transaction have been identified as a way to facilitate money laundering and is a growing problem on a global basis. Transparency International, identified circa £4.4billion worth of property had been purchased by nefarious individuals known to be considered high risk or previously charged with corruption. (May 2017).
As a result of these issues, the Treasury has suggested that focusing on estate agents and not including private landlords in the 5AMLD, could be a mistake and increase the risk of illicit funds being used to purchase properties privately and not via banks or other regulated financial institutions, and then managed by agents or private landlords.
Even though we are currently going through the complexity of Brexit and this is, in effect, an EU law, it is said that the UK will adopt a version of 5AMLD in to UK Law.
That said it is important for both property professionals and private landlords should keep a close watch on the legislation both in the UK and also how the rules will apply to other EU countries, as each member of the EU may have it’s own rules and regulations..
