Chalmers Business Risk Assessment

Business Risk Assessment

Introduction

This Business Risk Assessment is required by Regulation 18 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR)

Chalmers Agency Ltd is a “relevant person”, as defined in the MLR, by reason of the fact that it carries out business performing “estate agency work” (as defined in the Estate Agents Act 1979). This means that all activity related to brokerage of the sale and purchase of residential property falls within the scope of the MLR (referred to in this document as “Regulated Activity”).

Regulation 18 (1) MLR requires Chalmers Agency Ltd to “take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”

This document records the risk assessment performed by the senior management of Chalmers Agency Ltd, as required by Regulation 18 (1) MLR, and carried out following a review of the Regulated Activity performed in the preceding 12 months.

National Risk Assessment

In December 2020, HM Treasury and UK Home Office published the National Risk Assessment of Money Laundering and Terrorist Financing.

The UK National Risk Assessment states:

UK property purchases remain an attractive method to launder illicit funds due to the large amounts that can be moved and the low levels of transparency of ownership or source of funds. Purchases made by corporate structures or trusts based in secrecy jurisdictions pose the greatest level of risk, due to the difficulties in determining the ultimate beneficial owners. The inherent complexity of these structures alongside their increased use since 2017 and the increased investigative resource requirements this brings, are assessed to result in the property sector being at high risk of money laundering.

Estate agency businesses’ (EABs’) facilitation of property purchases puts them at a medium risk from money laundering. The increase in score since 2017 is again a result of a greater understanding of the risks in the sector and the increase law enforcement has observed in money laundering cases involving overseas buyers and use of complex structures.

Overall, EABs continue to have a lot of weaknesses in their anti-money laundering and counter-terrorist financing (AML/CTF) controls, limiting the mitigations against the risk of money laundering in the sector. Common failings are the lack of bespoke policies, controls and procedures aligned with an appropriate risk assessment of each firm’s clients. This includes a lack of consideration of property location on the risk (e.g., failing to recognise that higher priced London property is at higher risk of money laundering). This is particularly true of EABs that operate solely online, with no face-to-face relationship with clients.

There is a high level of competition within the housing market therefore, EABs may be deterred from fully conducting CDD in case they lose out to less compliant competitors. Likewise, the fractured nature of transactions, involving various regulated professionals, may influence EABs to rely on others such as lawyers to conduct CDD, believing the risk or responsibility lies with others in the process.

Whilst the UK’s national terrorism threat level is substantial, the UK’s terrorist financing threat continues to involve low levels of funds being raised by UK individuals for the purpose of lifestyle spending and low sophistication attacks. The majority of funds raised domestically are predominantly collected through legitimate means which includes salaries and state benefits. Terrorists are also using methods that are easily accessible to purchase items for attacks such as cash and debit/credit cards.

We have seen very little evidence to suggest that UK property transactions are used for terrorist financing and assess the risk of terrorist financing in the property sector, estate agency businesses and letting agency businesses to be low.

Risk factors affecting the business

Risk Profile Factor	Description

Composition of Seller Customer Base	Individual owner-occupiers, individual buy to let investors, executors/personal representatives of deceased estates, corporate buy to let investors, corporate property developers, sales arising under power of attorney and trust structures

Composition of Buyer Customer Base	Individual(s) acquisition as owner occupier, individuals acquisition as buy to let, corporate buy to let investors and corporate property developers, purchase via trust structures for any purpose

Delivery Channel	The majority of Chalmers Agency’s clients are UK based individuals, with whom the Estate Agent will meet at the beginning of the business relationship, and such clients are considered to represent a low risk of money laundering. The business does however carry out some business which could be perceived as higher risk, whether because it is conducted without meeting face to face, or due to the nature of the instructing client. Around 5% of business is conducted without meeting the client face to face.

Services	Brokerage of sales and purchases of residential property High range Estate Agency. Brokerage of letting of residential property Provision of management services for residential lettings

Transactions	The transactions arranged bring together the seller and buyer of a UK property to the point of agreement of Memorandum of Sale, whereupon the transaction is primarily progressed through a legal services provider to the point of completion The seller pays the agency fee upon completion, normally through their legal service provider Customers typically finance transactions from the proceeds of a regulated mortgage contract, proceeds from the sale of a property and cash deposits (all combinations of these sources of funds and wealth) No client money is handled in connection with Regulated Activities for residential sales Client money is handled and passes through a designated Client Account during the performance of Regulated Activities for residential lettings

Geographic Scope	Chalmers Agency Ltd is a single branch firm with offices predominantly in the Essex area of England.

Processes and Controls

The table below sets out the level of risk associated with each category of instructing client, and the controls that are in place to mitigate those risks.

	Nature of Risk	Likelihood	Gross Risk Assessment (Pre-control)	Control measures	Net Risk Assessment (Post-control)
1	The business is instructed by an individual living in the UK, where: The transaction is conducted face to face The property value is not in the top 5% of properties in the local area Online ID verification returns a positive result Online checks indicate that the client is not a PEP/RCA nor subject to Sanctions	High	Low	Lifetime Legal verifies the ownership of the property using Land Registry data (for a sale), and verifies the identity of the Client using a combination of electronic ID verification and facial recognition software. ID checks use Experian and Equifax data to match the Client to their residential address. Personal ID (Driving Licence number or Passport Number) is verified using an algorithmic check, while facial recognition checks use Credas Technologies Ltd or a similarly accredited provider of such checks.	Low
2	The business is instructed by an individual living outside of the UK	Medium	Medium	Lifetime Legal verifies the ownership of the property using Land Registry data (for a sale), and verifies the identity of the client using facial recognition software. Evidence of residency is obtained in the form of appropriately certified copies of proof of address.	Low
3	The business is instructed by an individual acting on behalf of the owner of the property, where the owner is unable to act on their own behalf.	Medium	Medium	In addition to the checks carried out in section 1 Lifetime Legal will obtain appropriately certified copies of documents authorising the individual to act on behalf of the owner (eg Power of Attorney, Court Order, Letter of Authority)	Low
4	The transaction is on behalf of the estate of a deceased owner.	Medium	Low	In addition to the checks carried out in section 1 Lifetime Legal will obtain copies of documents demonstrating that the individual(s) instructing the business have authority to act on behalf of the estate (Letters of Administration; Will/Death Certificate)	Low
5	The business is instructed by an individual acting on behalf of a UK-based corporate entity (eg a company, charity or trust)	Medium	Medium	Lifetime Legal will take steps to identify and verify the identity of the ultimate beneficial owners of the corporate entity, and will obtain evidence of the individual’s right to act on behalf of the corporate entity.	Low
6	The business is instructed by an individual acting on behalf of a corporate entity based outside of the UK.	Low	Medium	Lifetime Legal will take steps to identify and verify the identity of the ultimate beneficial owners of the corporate entity, and will obtain evidence of the individual’s right to act on behalf of the corporate entity.	Low
7	The business is instructed by an individual living inside the UK where: Online ID verification does not return a positive result	Medium	Medium	Lifetime Legal verifies the ownership of the property using Land Registry data (for a sale), and will verify the client’s identity using a combination of facial recognition software and appropriately certified copies of proof of ID and proof of address.	Low
8	The business is instructed by an individual who is a PEP or an RCA of a PEP, where the PEP is based in the United Kingdom.	Low	Medium	In addition to the checks set out in section 1 Lifetime Legal will obtain confirmation from the client of their source of funds. The case will be referred to the firm’s MLRO who will conduct a search for any adverse publicity relating to the individual, prior to making a decision on whether to proceed with the transaction, and for ongoing monitoring.	Medium
9	The business is instructed by an individual who is a PEP or an RCA of a PEP, where the PEP is based outside of the United Kingdom.	Low	High	In addition to the checks set out in section 1 and section 8, the MLRO will obtain and document evidence source of funds / wealth over and above the statement obtained by Lifetime Legal. Where any PEP is unable or unwilling to use the electronic facial recognition software, copies of ID documents will be obtained having been certified by a recognised professional. The MLRO will conduct ongoing monitoring throughout the business relationship to identify any suspicious activity that may arise.	Medium
10	The business is instructed by an individual who is subject to Sanctions.	Low	High	Lifetime Legal will refer the case to the MLRO. The firm will not proceed with the transaction.	Low
11	The business is instructed by an individual from a high risk jurisdiction as defined in the current FATF list.	Low	High	Lifetime Legal will refer the case to the MLRO. The firm will not proceed with the transaction.	Low
12	The transaction has not been conducted face to face.	Medium	High	Lifetime Legal verifies the ownership of the property using Land Registry data (for a sale), and verifies the identity of the Client using a combination of electronic ID verification and facial recognition software. ID checks use Experian and Equifax data to match the Client to their residential address. Personal ID (Driving Licence number or Passport Number) is verified using an algorithmic check, while facial recognition checks use Credas which is an accredited provider of such checks.	Medium
13	The value of the property is in the top 5% in the local area.	Low	High	In addition to the checks set out in section 1 Lifetime Legal will refer the case to the firm’s MLRO for a decision on whether to proceed with the transaction and for ongoing monitoring.	Medium

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