Why Estate Agents Need AML Checks When Buying or Selling a Home

ID checks, proof of funds and why we're not just being nosey.

You've decided to sell your house, or maybe you've found one you want to buy. Exciting stuff! Then the estate agent starts asking questions.

Can we see your ID? What's your current address? Who actually owns the property? How are you funding the purchase? Can you provide proof of funds? Where has the money come from?

At some point, you could be forgiven for thinking:

“I'm buying a three-bed semi in Blackburn, not applying to join MI5.”

But there is a reason for all of it. Estate agents have legal responsibilities when it comes to preventing money laundering, terrorist financing and other forms of illicit finance. Which means sometimes we have to ask questions that might feel a little intrusive.

So, let's explain why.

First things first… what actually is AML?

AML stands for Anti-Money Laundering.

Money laundering is essentially the process of making money obtained through criminal activity appear legitimate. And property can be attractive to criminals because large amounts of money move through property transactions. Buy a property using criminal funds, sell it later and suddenly the money can appear to have come from a perfectly legitimate property sale.

Obviously, that's the very simplified version. The important bit for you is this:

Estate agents are part of the UK's frontline defence against it.

We're required to carry out checks on the people involved in property transactions and understand enough about the transaction to identify when something doesn't look right. So no, the AML check isn't something we've invented because we particularly enjoy paperwork.

“But I'm the SELLER. I'm not giving you any money!”

This one comes up quite a lot. It's easy to understand why buyers need checking as they're the ones arriving with hundreds of thousands of pounds, but why the seller?

Because under the Money Laundering Regulations, an estate agent's customer due diligence responsibilities apply to both sides of the property transaction. That means we need to identify and verify the relevant people involved — including sellers and buyers.

For a seller, we'll also need to establish that the people instructing us are actually entitled to sell the property, so hopefully it seems fairly sensible when you put it like that

You probably wouldn't want us selling your house because somebody wandered into the office and confidently told us it belonged to them.

So what are we actually checking?

For most people, AML checks are fairly straightforward.

We're establishing things such as:

Who you are
Where you live
Who owns the property
Whether you're acting for yourself or somebody else
How a purchase is being funded
Whether the information provided makes sense in the context of the transaction

Depending on the circumstances, we may need additional information or documents.

That's where questions about proof of funds and sometimes source of funds or wealth can come in. And yes, we appreciate that asking to see evidence of somebody's money can feel personal. We're not interested in whether you spent £86 in Tesco last Tuesday, we're trying to understand whether the funds being used in the transaction come from a legitimate and credible source.

Proof of funds and source of funds aren't quite the same thing

This is worth explaining because they're often confused. Proof of funds essentially shows that the money exists, for example, evidence of a deposit, available cash or mortgage funding. Source of funds goes a little further, it asks:

Where did that money actually come from?

Savings? Sale of another property? Inheritance? Gift? Investments? Business income?

The answer isn't automatically suspicious because it isn't sitting neatly in one savings account, but depending on the transaction and the level of risk, we may need evidence that helps us understand the journey of the money.

“My solicitor is doing AML checks. Why do you need to do them as well?”

Another very common question. Your solicitor will carry out their own checks. Your mortgage lender may carry out checks and your estate agent has responsibilities too.

We're different businesses with different roles in the transaction, and one professional carrying out checks doesn't automatically mean everybody else can simply ignore their own obligations. Yes, this can occasionally mean providing similar information more than once and we appreciate that's mildly irritating, but unfortunately, “Their solicitor has probably checked it” isn't an AML procedure.

Why have I been asked more questions than somebody else?

Because AML isn't necessarily a one-size-fits-all process. Estate agents are required to take a risk-based approach. Most transactions are straightforward and the standard checks are enough, but sometimes something means we need to look a little closer.

That might involve the way the purchase is being funded, company ownership, overseas connections, third-party funds or other circumstances surrounding the transaction. There are also specific considerations around things such as politically exposed persons (PEPs) and financial sanctions.

Being asked additional questions doesn't automatically mean you've done anything wrong.

It can simply mean we need more information before we're satisfied that we've completed the checks we're required to carry out.

“I've been flagged. Are you accusing me of money laundering?”

No. And this is an important one.....modern AML checks can screen against a number of sources and risk indicators. A result may mean something needs verifying, there may be somebody with a similar name, there may be information that requires clarification, or the circumstances of the transaction may mean enhanced checks are appropriate.

A flag is not the same thing as an accusation, but equally, an estate agent can't simply ignore something because the client tells us there's nothing to worry about. We have to look at it properly and follow the appropriate process.

Why can't you just make an exception?

Because AML obligations aren't optional. It doesn't matter if.....“I've lived here for 30 years.” “Everyone around here knows me.” “I've bought through you before.”......or even, “Ask Dave. He'll tell you I'm fine.”

Dave may well think you're lovely, but, unfortunately, Dave isn't an acceptable customer due diligence procedure. If we're required to obtain certain information, we need to obtain it and if we're not satisfied with the information we've received, we may have to ask more questions before we can continue.

What happens if something genuinely doesn't look right?

This is where things become more serious. Estate agents are required to have procedures for identifying and dealing with suspicious activity. That doesn't mean every unusual transaction gets reported as money laundering. Property transactions can be complicated for completely innocent reasons, but if something gives rise to a genuine suspicion, there are legal procedures the business must follow.

And there may also be situations where we're limited in what we can tell a client about what is happening behind the scenes. That's not us being deliberately difficult. There are circumstances where the law itself restricts what can be disclosed.

What if an estate agent just… doesn't bother?

That's not really an option. Estate agency businesses carrying out regulated activity must comply with the Money Laundering Regulations and be appropriately supervised. Failing to meet those responsibilities can lead to regulatory action, financial penalties and, in serious circumstances, criminal consequences.

So when an estate agent keeps chasing you for an outstanding AML check, they're not doing it because they've run out of other things to do. They need it.

And what about the company doing the checks?

Many estate agents use specialist identity verification or compliance providers to help carry out AML checks. That can make the process quicker and allow electronic identity verification, screening and risk checks to be carried out efficiently, but here's an important point.

Using a third-party AML provider doesn't remove the estate agent's responsibility.

The agent still needs to review the information and decide whether anything further is required. Computer says green isn't quite the end of the story and computer says red doesn't automatically mean somebody's a criminal either. There still needs to be proper consideration of the result.

So why does your estate agent need to know so much about you?

Because property involves large amounts of money. Because criminals do use property to move and disguise illicit funds. And because estate agents are legally required to play their part in preventing that from happening. For the overwhelming majority of buyers and sellers, AML checks will simply be another bit of admin on the road to moving home.

Complete the checks. Provide the documents. Answer any additional questions.And off we go.

We appreciate it's not the exciting part. Nobody has ever collected the keys to their new home and said:

“Do you know what really made this experience? The identity verification.”

But it matters.

No Fluff Takeaway

If your estate agent asks for ID, proof of funds or some additional information about where money has come from, don't panic.

It doesn't mean you're under suspicion. And we're not asking because we're nosey. We're asking because estate agents have legal responsibilities to know who we're dealing with, understand the transaction and act when something doesn't look right.

Sometimes that means asking awkward questions. Sometimes it means asking for another document, and sometimes it means we can't proceed until those checks are complete.

It's not red tape for the sake of red tape. It's part of making sure property transactions aren't being used to turn dirty money into clean money.

And that's one bit of paperwork that's probably worth doing properly.