EU money laundering rules ‘will increase cost of buying a house’
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Beefed up European anti-money laundering rules will tie UK housebuying processes up in red tape, slowing deals down by as much as six months and ramping up fees, lawyers have warned.
The fourth EU Anti-Money Laundering Directive came into force yesterday and lawyers predicted that it would force banks and estate agents to conduct significant amounts of additional due diligence on both buyers and sellers of residential property. Penalties for not complying would the EU rules will be “hefty” fines, they warned. The EU rules will require formal risk assessments to be conducted.
Conveyancing lawyers forecast that the new regime would not only increase workloads for lenders and estate agents, but also force them to finance additional training courses for their staff.
Estate agents are likely also to face increased costs as they will be forced to recruit additional staff deal with the administration burden. Residential property lawyers said they estimated UK estate agencies would face up to £6 million in additional staff and administration costs, which they would be likely to pass on to buyers.
The EU directive will force banks, estate agents and other regulated professionals in the housebuying processes – including lawyers – to make even greater efforts to ensure the identity of sellers and buyers. There is also a new requirement to force overseas branches of British parent companies to apply British standards. Lawyers predict that the rule will “cause huge concerns to international businesses” – including estate agents, auctioneers and surveyors – and prompt some to move their head offices abroad.
“This is going to create substantial challenges for the property sector,” said Alex Ktorides, a partner at London law firm Gordon Dadds.
Ktorides said imposition of the regime had been abrupt, with the final version of the directive only having been made public yesterday. He said that had “left no time for banks, estate agents and the lending sectors … to update their policies and processes alongside training staff on the new regime. Some agents have in excess of 100 branches and have received no prior time to implement the new processes in order to comply.”