Estate agents in the UK play a critical role in preventing financial crime, particularly when it comes to property transactions. Under the Money Laundering Regulations 2017 (as amended), estate agents must conduct customer due diligence (CDD) to verify the identity of buyers and sellers, assess risks, and check the source of funds. However, instead of conducting these checks themselves, estate agents can sometimes rely on due diligence performed by other regulated firms—such as solicitors.
This process is known as third-party reliance, and while it can save time and resources, it comes with strict responsibilities. In this guide, we’ll explain how estate agents can safely rely on third-party CDD and how LondonCDD can assist in ensuring compliance.
Understanding Third-Party Reliance Under UK Money Laundering Regulations
What is Third-Party Reliance?
Third-party reliance allows an estate agent to rely on another regulated firm’s due diligence checks rather than conducting their own. This is permitted under Regulation 39 of the UK Money Laundering Regulations, provided certain conditions are met.
When Can Estate Agents Rely on Another Firm’s CDD?
An estate agent may rely on another regulated firm’s due diligence if:
- The third party is a regulated firm (e.g., an SRA-regulated solicitor or an FCA-authorised financial institution).
- The third party has conducted adequate CDD, including identity verification, address verification, and risk assessment.
- A formal written reliance agreement is in place.
- The third party agrees to provide copies of due diligence records upon request.
Who Remains Liable?
Even when relying on another firm’s CDD, the estate agent remains responsible for compliance. If due diligence is inadequate or if there are any breaches, the estate agent—not the third party—could face enforcement action from HMRC, which oversees AML compliance for estate agents.
Steps Estate Agents Must Take When Relying on a Third Party
To ensure full compliance and mitigate risk, estate agents must follow these steps when relying on another regulated firm’s due diligence:
1. Confirm the Third Party’s Regulatory Status
- Verify that the solicitor or other firm is regulated by a recognised body (e.g., SRA, FCA, ICAEW, HMRC).
- If based overseas ensure the firm is subject to equivalent AML regulations.
2. Obtain a Written Reliance Agreement
- This agreement must state:
- The scope of reliance.
- The solicitor’s agreement to provide due diligence records upon request.
- That the estate agent remains legally responsible for compliance.
- Without this agreement, reliance is not legally valid.
3. Review the Third Party’s Due Diligence
- Check that the CDD includes:
- Identity verification (passport, driving licence, etc.).
- Proof of address (utility bill, bank statement).
- Source of funds checks, especially for high-risk transactions.
- Risk assessments (e.g., politically exposed persons (PEPs) or sanctions screening).
4. Conduct a Risk-Based Assessment
- Even with third-party reliance, estate agents should apply their own risk-based approach.
- If the transaction involves offshore companies, large cash payments, or complex structures, extra due diligence may be required.
5. Ensure Access to CDD Records
- Regulation 39(3) states that the solicitor must provide full access to due diligence records if requested.
- If access is denied, the estate agent must conduct their own checks.
6. Keep Records for Five Years
- Retain reliance agreements and supporting CDD records for at least five years.
- Be prepared to provide them to HMRC if requested during an audit.
How LondonCDD Can Help Estate Agents Stay Compliant
Navigating third-party reliance can be complex, and estate agents need robust systems in place to ensure compliance. This is where LondonCDD can assist.
LondonCDD’s Compliance Solutions:
✅ Regulatory Expertise: We ensure estate agents fully comply with AML regulations when relying on third parties. ✅ Due Diligence Reviews: Our team reviews solicitor-provided CDD to confirm its adequacy. ✅ Reliance Agreement Templates: We provide legally sound agreements to formalise reliance arrangements. ✅ Ongoing Monitoring & Audits: We help estate agents keep records up to date and ensure ongoing compliance with HMRC requirements. ✅ Enhanced Due Diligence Support: For high-risk transactions, we offer advanced screening and risk assessment services.
By partnering with LondonCDD, estate agents can confidently manage AML obligations while streamlining their operations.
Final Thoughts
Third-party reliance can be a useful tool for estate agents, saving time and reducing duplication of effort. However, it comes with regulatory obligations that cannot be ignored. By following best practices—such as ensuring a written agreement, reviewing the solicitor’s CDD, and maintaining access to records—estate agents can safely and legally rely on third-party checks.
For estate agents looking for expert AML support and compliance solutions, LondonCDD is here to help. Get in touch with us today to safeguard your business against financial crime risks while ensuring full regulatory compliance.
