In the UK, HM Revenue and Customs (HMRC) has recently published some updated guidance for money laundering supervision in the real estate agency sector. It sets out expectations around the steps that real estate agents should take to help meet their legal and regulatory obligations with regards to preventing and identifying tax evasion, money laundering, violation of sanctions and terrorist financing.
One key area that the guidance emphasises is the responsibility of senior managers who may be held personally liable if "they do not take the steps necessary to protect their business from money laundering and terrorist financing".
Penalties in some circumstances can include imprisonment.
The HMRC guidance defines a senior manager in this context as someone who has the authority to make decisions that affect the business’s exposure to money laundering and terrorist financing risk. Examples include but are not limited to directors, company secretaries, CEOs, members of a management body or someone who performs those functions.
Some specific senior management responsibilities set out in the guidance include ensuring that:
- A financial crime risk assessment has been conducted to identify where the business is exposed to the risk of money laundering and terrorist financing;
- A risk-based approach is implemented so that higher risks can be prioritised appropriately;
- Policies, procedures and controls are in place to help mitigate financial crime risk and are documented, subject to regular review (at least annually) and refreshed in line with changes to any risks;
- Policies, procedures and controls are communicated to subsidiaries and branches, both in and outside the UK;
- There are enough trained resources to implement the policies effectively;
- Controls work effectively across the breadth of the business, including in subsidiaries and branches, and that improvements are made when required;
- Systems are in place to identify transactions involving persons or entities in high risk countries or who are subject to sanctions; and
- They approve the entering into, or continuation of a business relationship with a Politically Exposed Person (PEP) or a PEP's family member or close associates.
The focus on the responsibilities of senior management in the real estate sector is not restricted to the UK. The general direction of travel of regulators and legislators internationally, is to place greater responsibility and accountability burdens on the senior management of regulated firms.
In the United Arab Emirates for example, recent updates to anti-money laundering legislation requires the senior management of Designated Non-Financial Businesses and Professions (DNFBPs), which includes the Real Estate sector, to fulfil some of the same responsibilities as those set out in the HMRC guidance.
Senior management should also be cognisant of their personal liability in the form of financial penalties and/or imprisonment as a deterrent to failing to fulfil those responsibilities.
If you are a senior manager in a real estate firm and you'd like to understand if the activities you are responsible for are being adequately fulfilled or you would simply like a focused review of your anti-financial crime environment, please contact Neal Ysart, Lead Regulatory & Investigations Advisor at email@example.com / Tel: +971 55 138 9250 or your usual Clyde & Co point of contact.
The senior managers of a regulated business are responsible for the oversight of meeting the Regulations and can be held personally liable if they do not take the steps necessary to protect their business from money laundering and terrorist financing.