PROPTECH-X ‘Proptech & Property News’: AML procedures “crucial” for agents | Seed funding reform

Andrew Stanton’s daily proptech & property news in association with Estate Agent Networking

PRESS RELEASE: AML procedures are crucial for agents

A recent article stated that almost a third of property professionals believed that their own Anti-Money Laundering (AML) compliance procedures would not stand up to the scrutiny of HMRC, should they come under investigation. According to Paul Offley, Compliance Officer at The Guild of Property Professionals, what is remarkable about that statistic is the large number of agents who are putting their businesses at risk, especially considering the massive fines HMRC have issued in the past for breaches.

“We have seen financially crippling fines issued within the industry by HMRC to agents for AML breaches, and not having robust procedures in place is putting both an agent’s livelihood and reputation at risk,” says Offley.

The sad reality is that the UK property market is targeted by organised crime syndicates as a means of laundering their money, which is why the sector need to remain vigilant and ensure that the correct procedures are in place to assist in eradicating the practice of money laundering through the housing market, and to protect agents and their business from being linked to criminal activity.

“While many agents may believe that a visit from HMRC will never happen to them, if it does, not being able to demonstrate the correct AML procedures will have dire consequences for the business. It shouldn’t be a risk that an agency is willing to take. It is crucial that an agency is prepared and stays up to date with the latest changes to the regulations to ensure they remain compliant. A business should ensure that their AML policies are reviewed on a regular basis to confirm that they meet the latest requirements,” he says.

According to Offley, agents will need to keep a record of the fact that they have gone through the correct procedures and performed the appropriate checks. “Making use of a digital platform such as movebutler from iamproperty will help agents to show the evidence required as part of their compliance with AML procedures. Apart from identifying any potential PEP or financial sanctions positions, these procedures also include identifying the legal owner of a property, a complete risk assessment on all sellers and buyers, appropriate and timely identification checks, and that the agent has kept accurate records. That is one part of the AML process, there is then the need to refer any ‘high’ risk case to your money laundering officer and continue with ongoing monitoring throughout the transaction. It is important that agents can show they have performed their due diligence and taken the necessary steps, which a digital platform can assist with by providing an essential audit trail,” he comments.

Paul Offley, Compliance Officer at The Guild of Property Professionals

“Providing compliance support to our networks has always been an important part of our membership services and we are always looking at ways to enhance that support and how we can use advancements in technology to achieve this. Things change so quickly, and we must keep up to speed on using technology as this has many benefits,” says Offley. “We have been so impressed with the feedback received from Guild Members using the movebutler platform, we will be expanding our partnership with them and extending the offering to the Fine & Country network within the UK.”

Ben Ridgway, iamproperty’s Group Managing Director, says: “Our movebutler platform provides a comprehensive automated solution for compliance and completion of customer due diligence, in a way that is efficient for both the agent and the consumer, and helps identify and prevent criminal activity by using the latest digital technology available.”

Offley adds that in additional to the compliance platforms offered by The Guild, the network also offers its Members a review which focuses entirely on the agency’s AML procedure, with the sole objective of ensuring that the business is fully compliant with the Money Laundering Regulations.  “If required, the review includes a rewrite of the agent’s Money Laundering Policy to ensure that they fall in line with the current regulations. It also includes briefing all office staff to ensure they understand and are following the correct procedures, as well as a check on all systems to ensure they are up to standard. The processes and controls are tested thoroughly to ensure they are effective and meet the required criteria,” Offley comments. 

“All property professionals should familiarise themselves with the procedures and requirements as much as they can, as well as implementing processes or technology which will make AML compliance easier.  Money Laundering Officers need to be able to demonstrate that they can perform their duties and making AML procedures a priority will ensure business are not hit with a hefty fine from HMRC,” he concludes.

PRESS RELEASE: SFC Capital calls for reform to outdated aspects of SEIS as first-time funding rounds plateau post-Covid

After ten years of the Seed Enterprise Investment Scheme (SEIS), data shows Government support needs to move with the times as startups’ needs change and inflation bites

26 April 2022, London: The number of first-time funding rounds into UK seed-stage startups remained flat in 2021, despite venture capital overall seeing another record year of funding, according to new research commissioned by SFC Capital. The data shows a decline in funding rounds between 2018 and 2020, and only a marginal uptick in 2021, far below the growth in later-stage venture capital. SFC Capital is therefore calling for urgent action to reinvigorate seed-stage investment and help secure the next generation of innovative businesses emerging across the UK, with SEIS at risk of becoming redundant as a funding mechanism due to startups’ growing funding needs and the impact of inflation. 

As funding begins to bounce back after the pandemic across many sectors, there were 1,635 first-time seed-stage deals completed in 2021, up only 1.2 per cent from 2020’s deal volume of 1,615. This represents a 18 per cent decline from peak funding of 2,005 in 2018. There is a clear gap emerging between seed-stage, and later- stage funding, as the volume of investment deals of £1m+, between 2020 and 2021, jumped from £495m to £989m, almost doubling. This analysis is based on Beauhurst’s data which includes every UK announced and unannounced deal.

Commenting on the current state of seed-stage funding – which SFC Capital has defied in its own performance over the past three years, in which is has deployed more funding and completed more deals than ever before – Stephen Page, founder and CEO, said: 

“The simple truth is that as we emerge from the pandemic, the money flowing into new businesses through SEIS is flat. SFC Capital is at the forefront of first-time deals, and what we’re seeing is that the early-stage startups with SEIS still available are, on average, asking for more than £500,000. Between May 2021 and April 2022, from the 135 funding applications we received, only 24 asked for £150,000 or less. This shows how demands have changed, and how outdated the £150,000 SEIS cap has become.

“SEIS has been with us for a decade, and has been crucial for UK innovation during that time. But startups have come on leaps and bounds and their needs have evolved, with inflation only adding to their challenges by eroding the value of their funding runway. SEIS funds collectively raised less than £25 million in the entire 2021/22 tax year – a miniscule amount compared to demand, clearly showing the supply-side problem with very early-stage capital. The current SEIS cap has clearly become a limiting factor, and if this is not addressed then startups will ignore the scheme entirely. 

“If that happens, the pipeline of funding for early-stage companies is fundamentally broken and will also lead to fewer investment opportunities at the later stage, further down the line. Innovative young companies will miss out on funding as investors look for alternative opportunities without the reliefs that come with SEIS.” 

Introduced in 2012, the Seed Enterprise Investment Scheme (SEIS) transformed the landscape of seed-stage funding, providing the incentive (through tax relief) and convenience (through funds, launched in 2014) for many more individuals to turn themselves into early-stage investors. SEIS has helped a total of 13,800 businesses raise £1.4 billion since its inception, with the volume of first-time seed deals increasing every year from 747 (2012)  to 2,005 (2018). 

Dom Hallas, CEO, Coadec, said: “SEIS has been instrumental in helping to get some of the UK’s best tech startups funded. But it’s now out of date and  with startup creation slowing it needs to be expanded to keep pace with the needs of a new generation of startups. Hopefully—amongst other changes—we will see the company allowance increased soon.”

Responding to the data, SFC Capital – the UK’s most active seed-stage investor – issued a call to arms to the Government to recall SEIS, focused on, increasing the amount of public money allocated to seed-stage funds and simplifying bureaucracy for early-stage fund managers:

  • SEIS reform – Changes should include: increasing the SEIS funding cap from £150,000 to £300,000 to bring the scheme in line with the needs of a modern startup and impact of inflation; extending the qualifying period from two years to three; relaxing state aid rules that prevent startups that secure grant funding from raising their full SEIS allowance; speeding up the approval process to prevent companies missing the deadline; increasing the investor-side cap from £100,000 to £200,000 to unleash capital that is currently going unutilised; abandoning the 2025 sunset clause.
  • Increase public sector investment – Public sector investment through vehicles such as British Patient Capital and British Business Investments reduces risk for private investors and exposes the Treasury to potentially significant upsides if companies succeed. While these publicly-backed funds are very active, they have comparatively little to invest at the very early stage. Making more public money available to support the growth of innovative startups would back the Government’s rhetoric about “levelling up”, “building back better”, and creating a “science superpower”.
  • Simplifying bureaucracy for funds – The introduction of an “approved fund” structure – such as exists with SEIS’s sister scheme EIS – would significantly reduce the administrative burden on funds by enabling them to produce a single certificate per investor covering all underlying companies, where currently they are required to produce one certificate per investor per company.

Stephen Page comments further, saying: “Critics of SEIS argue that it uses taxpayers’ money to de-risk investments by wealthy individuals into speculative businesses, and demand to see specific positive impacts on employment and tax receipts from these companies. This criticism misses the point. It will always be hard to calculate how much of a company’s growth is specifically attributable to SEIS investment. The point is that SEIS stimulates the innovation and entrepreneurialism that help shape the economy for the demands of the future. Now more than ever, as we face up to a world defined by the impact of extraordinary recent and ongoing events – from Brexit and the Covid-19 pandemic to the war in Ukraine and the climate crisis – undermining the ability of the UK to foster innovation would be shooting ourselves in the foot.”

Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.

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