Property syndicates - who needs identifying

I have taken over a block of 40 clients from another accountant. Each of these is a property syndicate with between 2 and 80 investors. The investors are mainly individuals (UK and overseas) with a few companies, trusts and pension schemes.

The syndicates are run day to day by the managing agent (ie managing the property, bookkeeping for the syndicate, making distributions to the investors etc). The investors are consulted on larger issues eg rent reviews, re-negotiation with the banks etc but in practice rarely even reply. The investors' capital invested is normally retained until the property is disposed of, typically 5- 10 years.

For money laundering purposes who do I need to identify? Is it the hundreds of investors or will the managing agent, who in practice runs the syndicates, suffice?

Comments
davidwinch's picture

Beneficial owners

davidwinch | | Permalink

Have a look at the Money Laundering Regulations 2007, particularly regulations 5, 6, 7, 8 & 14.

First consider whether reg 14 applies (enhanced due diligence).

Then consider whether anyone other than the managing agent meets the criteria of 'beneficial owner' in reg 6.

When you have done that look at reg 5 which tells you (in the light of your consideration of regs 14 and 6) who you need to confirm the ID of (in addition to the client entity itself).

Then regs 7 and 8 tell you when you need to carry out your client due diligence.

David

Still confused

Alf | | Permalink

Thanks for your suggestions, David. I had previously looked at the CCAB guidance and the JMLSG guidance although not the regulations themselves.

However I am still confused - whether or not Ehanced due Diligence (EDD) applies will depend on who are my customers:

- the syndicates themselves (not an actual entity), or

- the investors (whom I have not met and rarely deal with) and who would presumably require EDD if they are my customers, or

- the managing agent whom I actually deal with and have met and would presumably not require EDD? 

There are a few beneficial owners, although far fewer than the total number of investors.

(Where a syndicate is say 40% owned by a company, which is in turn owned 50/50 by a husband and wife, are there no beneficial owners as the husband and wife each own only 20% of the syndicate or is the company a beneficial owner of the syndicate with 2 beneficial owners itself?)

Thank you again

davidwinch's picture

Clients

davidwinch | | Permalink

I would think that there is some document (such as a trust deed) which acts as the 'constitution' for each syndicate and I would think that your engagement letters would have been addressed to (and signed by) the managing agent on behalf of each syndicate.

In England & Wales a partnership is not a legal entity but you would have no difficulty recognising a partnership as a 'client' would you?  In the same way each syndicate is, in my view, a client (which means you will need to see the 'constitution' of each one and send a separate letter of engagement to each one).

I would think that if a company owns, say, 40% of a syndicate the company is a 'beneficial owner' of that syndicate and you need to satisfy yourself that you have establlished 'who the company is' and who the company's 'beneficial owners' are.  A search at Companies House should yield this information.  Since neither the company nor its shareholders are clients there is no need to ask for (e.g.) passports for the shareholders in the company in my view.

David

Bottom line

Alf | | Permalink

Thanks David - you are correct that the syndicates are governed by a trust deed and that the engagement letters are signed by the managing agent.

So if I obtain:

  1. Names & percentage holdings for each investor
  2. Either bank statement or VAT registration certificate for each syndicate
  3. Details from Companies House for the (limited company) managing agent
  4. Names of beneficial owners in syndicates

In your opinion, will that be sufficient

Thank you again

David

davidwinch's picture

Bottom line

davidwinch | | Permalink

I would suggest:

 

 

  1. Names & percentage holdings for each investor
  2. Either bank statement or VAT registration certificate for each syndicate
  3. Details from Companies House for the (limited company) managing agent
  4. Names and addresses of beneficial owners in syndicates and beneficial owners of managing agent company
  5. Trust deed for each syndicate

David

Thank you

Alf | | Permalink

Thank you David - I was struggling to translate the huge volume of guidance and regulation into practical steps.

Much appreciated.

David

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