HMRC Cracks Down: Property Sourcing Agents Fined for AML Non-Compliance

Let’s start by being honest, we have only examined two of the staggering 42 page fine list issued by HMRC.

In these two pages alone we have already found 5 sourcing businesses that have been fined by HRMC.

Whilst we continue through the list, questions are being asked by the team – how many UK sourcing agents are we going to find?

The number of sourcing businesses being fined seems to be increasing each year rather than going down?

Most news outlets focus on the estate agency side, however as we are the National Association for Professional Sourcing Agents (NAPSA), it’s important we understand the impact these fines are having on sourcing businesses and what we can take as learnings.

Even more alarming – according to iamproperty, in the first quarter of this year there has already been an estimated 250 estate agency branches already fined by HMRC; with fines said to be in the region of £1.6 million total – ranging from £1,500 to £50,000 for individual businesses.

Whilst we don’t know how many sourcing agents are in this year’s list so far, based on our current findings for 2023, and the lack of awareness or proper training STILL on many sourcing courses in the UK, we well imagine more fines have and will continue to be issued.

Failing to Register For Anti-Money Laundering (AML) Supervision

Let’s bring it back to HMRC’s latest report covering 2023.

All of the sourcing agent fines we have found so far are for ‘failing to apply for registration at the required time’. 

If you’re unsure what this means, each of the sourcing businesses have:

• Registered with Companies House
• Traded
• Not Registered with HMRC for AML Supervision (or not in a timely manner)

We actually don’t know what the required timeline is that HMRC bases when to and not to fine a sourcing business from when they register with Companies House.

Any agent we speak to, we generally advise to complete HMRC registration absolutely within 30 days and definitely DO NOT TRADE before then.

We won’t name the five sourcing businesses we have found, however we can note they were based in:

• Kent
• Wimbledon
• Cheshire
• 2x London

The fines issued ranged from:

• £2,585
• 2x £14,000
• £23,400

We know from our sourcing agent members and many others out there – any one of these fines could be enough to serious hurt or even close down their businesses.

Agents Didn’t Use SIC Code 68310

What we found interesting was the sourcing agents found to have been fined, didn’t have:

• Sourcer / Sourcing / Deal Finder etc. in their company name
• They hadn’t all used SIC code 68310 when registering with Companies House

If you think about it, some companies are titled FIRST NAME LAST NAME LTD – so you may not know on the front of it what they actually offer.

So, how do we know they are sourcing agents?

This is why we are only at page 2 of 42! We have reviewed each company to check what their services are via their website and socials. From this we understand they are operating as in fact sourcing businesses.

How Did HMRC Know?

This is the big question, as some of the estate agency businesses hadn’t even registered their companies under the correct SIC code, highlighting the level of detail and interrogation HMRC are taking when reviewing your business – and the connection they have with Companies House.

The key takeaway here is there really is no hiding under random SIC codes – especially the ones shared on courses as miscellaneous ones.

The correct and only SIC code for Estate Agents and Property Sourcers / Deal Packagers etc. is 68310

From this list, we can take it as HMRC’s message to Property Professionals: Comply or Pay the Price

Can HMRC Fine if We Haven’t Traded?

If you’re concerned that HMRC may be coming for you this year as you haven’t registered your business with them, you should be.

Based on the above, they are taking a lack of AML supervision very seriously.

If you haven’t registered yet and not traded, we recommend you:

• Get a letter from your accountant confirming you are still setting up your business
• Make your company dormant (if you’re not planning to trade any time soon)

Already been fined by HMRC even though you haven’t traded?

We have helped two sourcing agents get their fines overturned after proving to HMRC that they hadn’t traded and were still setting up their businesses.

If this is you, please reach out to our team at [email protected] and we’ll aim to help where we can.

Not Registered For AML Supervision and Traded?

If you have traded, unfortunately you’re going to have to expect to take a hit – it’s just a matter of when and how much.

The advice would be to get AML training, all required documents and supervision in place. This will likely trigger HMRC to investigate you, however it’s better sooner than leaving it and building up an even bigger fine. If you have everything in place to go forward, from experience, any fine will just reflect your failures during previous trades.

As above, the fines are dictated on how long you have left to register with HMRC + how much you have traded in that time period.

If you have serious concerns about this for you and your business, please message our team at [email protected]

Where Can I Get AML Training And Do I Need it to Register With HMRC?

There are plenty of places online you can complete online training for AML, however these tend to be quite general.

We have developed – through our training company partners – Professional Sourcing Compliance (PSC) a fully online course that takes just a couple of hours to complete.

Best bit, it has been created specifically for sourcing agents and will walk you through how to manage AML day to day in your business.

The AML course is currently combined with Data Protection training and costs just £95 p/p. You’ll get a certificate at the end of the training as proof should HMRC ask:

NAPSA Members get a 25% discount, bringing the cost down to just £71.25 p/p

https://www.getpropertycompliant.co.uk/offers/5EFDEsxn/checkout

Yes, you are required to have provable training to register with HMRC – they do ask!

As a sourcing business you are required to carry out Data Protection (ICO Supervision) and AML (HMRC) training every year.

Make sure you / other directors and shareholders in your business are topped up with provable training!

Prevention is Key

What we can takeaway from this is that for a small amount of cash each year, sourcing businesses can save themselves an awful lot of cost and likely heartache.

We are trying to build awareness of what you need to do as businesses to stay on HMRC’s good side – unfortunately we are still up against training companies just not teaching the right information, however it’s the sourcing agents that literally pay the price for their poor guidance.

Make sure you:

• Complete Your AML Training (£95 / NAPSA £71.25)
• Register for AML Supervision (£350 per premises / person)

If you’re unsure what else you need on the sourcing compliance list, please do register with us and we’ll send you our Business Set Up Guide.

To help, we are throwing in 30% discount for NAPSA Membership – just use the code PROFESSIONAL24 at checkout: https://napsa.org.uk/join-us/

NAPSA’s core mission is to educate the sourcing sector for the better, build credibility and trust from investors who have either heard bad things about sourcing agents or been burned themselves. We are building a community of professional and compliant sourcing agents, whilst providing a safer space for investors to search and communicate with approved and credible sourcing agents.