The 5AMLD: What Is It and What Does it Mean for Conveyancers?

The 10th of January 2020 will see the latest attempt by the UK government to tackle money laundering come into force. But what is the 5AMLD? How does it differ from the Money Laundering Regulations 2017? And, most importantly, what does it mean for conveyancers?

What is the 5AMLD? 

The Fifth Anti-Money Laundering Directive (or 5AMLD if you like acronyms) is an EU directive enacted in early 2018. It’s being adopted by the UK now because the January 2020 deadline for transposition of the directive – the date it must be made part of UK law by in non-EU legalese – is fast approaching. 

It’s the latest attempt to combat money laundering, currently costing the UK £100 billion a year according to National Crime Agency figures, and will supersede the Money Laundering Regulations 2017.

How Does it Differ from the Previous Regulations?


It’s important to note that the 5AMLD is nowhere near as extensive as its predecessor the Fourth Anti-Money Laundering Directive (transposed as the Money Laundering Regulations 2017 in the UK). The previous directive completely transformed the way business approach money laundering, bringing in changes such as the risk-based approach and removing automatic exemptions from due diligence.   


Instead, the 5AMLD is more about subtle tweaks to the existing structure of the last directive. It adds some additional provisions that weren’t in the original scope of the 4AMLD. These changes mostly focus on enhancing access to information and increasing the transparency of beneficial ownership information and trusts. The changes include:

  • Stricter regulation of payments in digital currencies such as Bitcoin and pre-paid cards to prevent terrorist financing
  • Improved safeguards for financial transactions to and from countries the EU deems as ‘high-risk’
  • Better access to centralised national bank and payment account registers or central data retrieval systems in all member states
  • Public access to the Registers of Beneficial Ownership introduced by the Fourth Directive
  • Greater transparency obligations for trusts, which will be required to meet the beneficial ownership requirements. This is alongside potential changes to the threshold for identifying beneficial ownership in high-risk cases 

What Does it Mean for Conveyancers? 
What does all this mean for firms operating in the property sector? Well, in simple terms, these changes shouldn’t have a dramatic impact on most firms in the short-to-medium-term. Although the directive includes firms acting as letting agents for the first time in high-value transactions with a monthly rent of €10,000 or more, this is unlikely to affect many firms outside of London.

Greater due diligence is required for any firm processing transactions in cryptocurrencies and it’s definitely worth conducting a risk assessment to establish whether your firm is exposed at all and training all staff accordingly.

For those dealing with corporate clients, there is a requirement that details of proof of beneficial ownership should be collected and checked. And, a new obligation to identify senior managing officials if corporate beneficial owners can’t be identified. It also looks as though this proof will increasingly need to be electronic.

The bottom line is that conveyancers should be conducting thorough anti-money laundering checks with every transaction. And, in most cases, this can be achieved by purchasing an AML check from Veriphy or a similar provider. One thing’s for sure, with potential fines of up to €5 million or 10% of annual turnover for non-compliance, it’s never been more important for conveyancers to get serious about anti-money laundering measures.  


Are British New Builds Declining in Quality?

Are British New Builds Declining in Quality?

New build properties have always carried a certain amount of emotional heft with them. For many people, a sparkling new two-bed on the quiet estate just out of town is their first experience of owning property – especially in the current marketplace with its acute shortage of affordable housing.

But could that dream fast be becoming a nightmare for some first-time buyers? Many buyers themselves certainly seem to think so. According to the HomeOwners Alliance’s The Home Owner’s Survey 7th Annual Report, 63% of UK adults believe housing quality is declining and becoming a serious problem.

In addition, the report indicates the quality of new build property could be one of the key drivers of negative perceptions of the UK’s housing stock. Some 40% of new-build homeowners report being unhappy with the snagging process, with as many as 20% concerned they were ‘coerced’ into paying the deposit before being able to identify snags and defects in their new home. 

More worrying still, over a third of respondents didn’t agree that their builder or developer resolved these defects within two years of the purchase date. And, some 43% disagreed that the warranty provider had fulfilled its responsibilities or explained the warranty properly. 

It could even be having a disastrous effect on the very aspiration of owning a home, once viewed as second only to births and weddings as the proudest day of many people’s lives. Some 72% of those surveyed felt that the property on offer for a first home is demotivating because the quality of the product is so poor.

What’s more, buyers perceptions appear to be being borne out in reality. According to housing charity Shelter, More than half of purchasers of new builds in England have experienced issues with construction, fittings and utilities.

What’s going on?

The Housing Crisis Comes Home to Roost

Perhaps the simplest reason for any lack of quality in new-build properties is the sheer speed at which they’re being built. There are very few policies that command universal appeal across the political spectrum but everyone from the most ardent Corybnite to the keenest Farage devotee is in accord over the need to build more houses.

The result is pressure handed down from central government to local authorities and developers to build as many houses as possible, as quickly and cheaply as possible. UK housebuilding figures hit a ten-year high in 2017-18, and this in an environment with precious little state investment, so it’s perhaps not surprising that some of these houses have been more thrown up than built.

Regulation (or lack thereof)

People are often surprised by the lack of regulation in the UK building sector. While there is a multitude of building regulations for the buildings themselves, covering everything from ventilation to weatherproofing, the industry is subject to the lightest of light-touch regulation.

Builders are not legally obliged to obtain a licence to work, and there is no official regulatory or licensing body for the industry. The more virtuous can sign up to bodies such as the National House Building Council (NHBC) or the Federation of Master Builders, but this is entirely voluntary.

The outcome of this is depressingly predictable; with no regulatory oversight and little punishment for substandard workmanship, it’s to be expected that less scrupulous builders cut corners. After all, they’re given every incentive to do so.

An Oligopolistic Market

The last big contributor to declining quality is the nature of the UK market. New-build property development is dominated by an oligopoly of 4 or 5 large firms, with crisscrossing webs of subcontractors doing most of the actual building work underneath.

Unsurprisingly, this leads to an accountability deficit and no real quality control as large developers struggle to adequately assess subcontractors’ work and bureaucratic buck-passing when buyers complain. Housing giant, Persimmon admitted as much in a Channel 4 documentary aired earlier this year stating: “We fully accept that on too many occasions in the past we have fallen short on customer care and the speed and empathy with which we dealt with problems.”

What Can be Done?

Firstly, regulation must be far tougher. As discussed, the new-build sector currently resembles something of a wild west scenario with little incentive for many builders to do anything other than construct hastily cobbled together, poor quality housing. Of course, any drive towards stricter regulation of the industry must come from central government, something that looks unlikely at present.

In the absence of regulation, there are calls from some quarters – most notably The Homeowners Alliance – for the introduction of a snagging retention fee. Under such a scheme, new-build homeowners would be permitted to withhold funds from house builders until they rectify faults. According to a recent poll by the Homeowners Alliance, this policy has overwhelming public support, with almost 9 in 10 (87%) of new-build homeowners backing the proposal.

Finally, on a more practical level, homebuyers can guard against poor-quality property by undertaking a homebuyers survey, as well as carefully checking for snagging – hard though that may be in the face of pressure from their agent to make an offer.

New build housing doesn’t have to be this way. The recent publicity surrounding the award-winning Goldsmith Street development in Norwich serves as a timely reminder that when we build well, we’re constructing so much more than bricks and mortar. 


How Will Crossrail and HS2 Really Affect Property Prices?

Large-scale British infrastructure projects are an odd thing. They’re very often late, even
more regularly overbudget, and many waver continually on the line between useful public
service and expensive white elephant. Yet for all that, for canny investors who’re willing to
roll the dice, public infrastructure projects can deliver very healthy returns.
This is particularly true of property. Property in close vicinity to key public infrastructure has
long had the potential to skyrocket in value. If you want an example of this, look no further
than the London Underground. Research from American real estate firm CBRE, recently
revealed that owners of properties within 500m of the Jubilee, Central, Metropolitan, Circle,
and Piccadilly lines have experienced annual growth rates of around 10% every year since
the financial crash.

But does this translate to Crossrail or the often criticised HS2?

Crossrail
Way back in 2012, Crossrail commissioned a study. This study went on to predict that by
2021, property prices close to the line’s new stations would increase by 25% more than the
average price increase in central London and 20% more in the suburbs.

So how are prices around the line’s 40 stations as Europe’s biggest travel and infrastructure
project reaches its final stage? (Crossrail was due to open in Autumn 2019 but is now likely
to be pushed back to spring 2021)
Well, while Crossrail’s initial predictions have proved to be as starry-eyed as they seemed at
the time, the effect has still been dramatic. Dubbed the “The Crossrail Effect” house prices
within a mile of any of the stations have shot up 66% since 2009– that’s 15 % more than the
rest of London. The most incredible of the Crossrail-generated price spikes is in properties
around Bond Street where prices have ballooned by 165.9% to £3.1m on average.
But it’s not just central London that’s seen prices rise. Even end-of-the-line Reading and
Abbey Wood have experienced annual spikes of 11.7% and 18.6% respectively.

What’s more, some experts are predicting a further increase in average prices once the
project is completed in 2021. Of course, this is likely to be somewhat dependent on the
outcome of the Brexit debacle and whether the long-predicted recession hits. However,
even in the event of a no-deal Brexit or another financial shock, properties near key
infrastructure are likely to hold their value better than others – at least according to the
research by CBRE mentioned earlier.

All-in-all, provided you’ve got at least £500k to play with, an investment property close to
Crossrail looks like a shrewd one. It’s difficult to think of anywhere else in the country
where property prices are almost guaranteed to rise year-on-year between now and 2021, and you
could well end up sitting on the next Bond Street.

HS2

Things are a little less cut and dry with HS2, a high-speed line connecting London,
Birmingham, Manchester, and Leeds.

Firstly, there’s the timescale. HS2 is now unlikely to be completed before 2033. Predicting
the state of the housing market in the next 12 months is difficult enough, let alone 14 years
into the future. And that’s, of course, assuming that the project ever reaches completion,
something that looks increasingly uncertain as pressure for it to be scrapped grows.

Secondly, no one quite knows how people will react to HS2. On the one hand, it could
completely tear up what we currently think of as the commuter belt. HS2 would slash
travelling times to London from all 3 connected cities:
 Leeds to London: 1 hour 28 minutes (down from 2 hours 20 minutes)
 Manchester to London: 1 hour 8 minutes (cut from 2 hours and 8 minutes)
 Birmingham to London: 49 minutes (reduced from 1 hour 21 minutes)
So, it’s completely possible we could see an influx of commuters heading north to take
advantage of cheaper house prices and a lower cost of living. This would quite quickly affect
house prices as demand grew.
On the other hand, the commute from both Leeds and Manchester is still relatively long and
likely to be pricey, meaning that for all but the most high-flying commuters the time and
cost may not be worth it. This presents the possibility that HS2 could become little more
than a very quick ride into London for tourists and day-trippers.
But all of this doesn’t mean we can’t make some predictions. Large rail projects do tend to
affect property prices, and we have Crossrail and HS1 for guidance.
Taking HS1 first, it’s actually quite likely HS2 will hurt property values, at least to begin with.
Those properties nearest to the proposed route of the line will probably experience a slight
dip in value due to the disruption caused by building.
Nevertheless, it’s important to stress that this is only temporary. While prices dropped
during HS1’s building stage, they quickly recovered once work was complete and soon
began to increase. The only caveat is for those properties that are so close as to be
adversely affected by noise; damage to the price of these properties is probably permanent.
Although, most of these properties will have been purchased by the government under
compulsory purchase orders anyway.

As for what we can learn from Crossrail, we’ve seen that across London the project has led
to substantial rises in value. It’s improbable that prices will rise quite so spectacularly in
Leeds, Manchester, or Birmingham – London is usually an anomaly when it comes to housing trends –
but given the potential for job creation and accessibility HS1 brings they
could well increase.

HS2 might be more of a gamble than it’s cross-city cousin, but when you consider that the
costs of purchasing in any of its three hub cities is substantially cheaper than London, it
begins to look a lot more attractive. In the very least it’s certainly worth keeping an eye on.


What Will A No-Deal Brexit Mean for Conveyancers?

Way back in 2017, we wrote a piece tackling what Brexit was likely to mean for the housing market. At the time, the idea of the UK crashing out of the EU without any kind of agreement in place was hardly considered outside the fantasies of a few hard Brexiters in the European Research Group.

How times change.

Prime Minister Boris Johnson began last week by insisting that the UK will leave the EU on October 31 st “whatever the circumstances”. Later the same day, European diplomats were quoted on the record that “A no-deal now appears to be the UK government’s central scenario”. And, Johnson’s most senior advisor, Dominic Cummings also started his week by instructing special advisers across government to step up preparations for a no-deal Brexit. All of which points towards the UK dropping unceremoniously out of the EU in just under 3 months’ time – barring a general election, an increasingly unlikely second referendum, or act of divine intervention.

But what does this mean for the housing market and, by extension, conveyancers?

The Housing Market Depending on where you look, the short-term forecast for the housing market ranges from grim to slightly less grim – something that’s true for both prices and transaction numbers. The Bank of England has described the potential impact of no-deal on the housing market as significant. It went further, saying house prices could plummet by as much as 30% in the event of no deal. Even more conservative estimates from mortgage lender Halifax suggest prices would quickly fall by 5%. This is against a backdrop of already fairly flat growth of around 0.4% for most of the year so far, with Halifax also reporting a slight decline in property prices from June. Alongside this, according to HM Revenue and Customs’ (HMRC) June data, transaction numbers are also falling.

The 84,490 residential transactions recorded in June represented a 9.6% monthly decline when compared with May’s figures and a 16.5% reduction in transactions when compared with June 2018.

According to analysts, this slowdown is mostly being driven by cash buyers who aren’t subject to chains and have no real pressure to move, and with Brexit creating uncertainty, it’s likely that many are simply opting to wait and see. And That Could Mean Bad News for Conveyancers For conveyancers it’s a simple equation; uncertainty generally means low confidence in the market which in turn means fewer transactions and, ultimately less work. This is likely to persist in the very least until past the October deadline. On a macro level, the legal sector as a whole could stand to be one of the hardest hit in the event of no deal. The UK is currently the second largest provider of legal services globally and the largest in Europe by some way, equivalent to 1.4% of UK GDP and creating an export surplus of £4.4bn as of 2017. However, despite its prestige and vital role in the UK economy, some experts are predicting a no-deal Brexit could cost the legal sector £3.5bn in lost volumes – a 10% decrease on an ‘orderly’ Brexit.

This is partly down to the potential loss of access to EU Lawyers’ Directives, which provide EU-wide rights on services and establishment, but also down to the wider economic impact of a deal-free exit such as stagnation of the housing market. But It Probably Won’t Last If you’ve made it this far without considering a career change or beating your head repeatedly on your desk, well done, it’s time for some good news. The last decade of political, economic, and social turmoil has revealed two things about the UK housing market. Firstly, that it hates nothing more than uncertainty. This is obvious, after all, most people don’t make big investments in times of unpredictability. Secondly, the UK housing market has proved remarkably resilient. This was demonstrated by its relatively swift return to form following the 2008 financial crisis.

Property remains one of the most stable assets and has always had a propensity for weathering political and economic storms and recovering quickly. If you take a longer-view, you can see that the national average for house prices has actually risen and the market has had stable year-on-year growth for the last decade – despite the Brexit vote. Even the fall in transaction numbers is viewed by most as a temporary blip and explainable as being down to the uncertainty caused by March’s deadline. Most commentators believe that once the Brexit debacle ends – even if that’s with a no-deal – transaction numbers should quickly begin to return as the housing market reasserts itself. On top of this, a decrease in house prices could act as a catalyst at the bottom end of the market, with first- time buyers receiving a timely incentive to get onto the ladder. Alongside this, a decline in the value of sterling could well make investing in high-value commercial and off-plan property more attractive to overseas investors – mitigating a lot of the damage a drop-off in everyday residential transactions. Of course, none of this is to downplay the potential impact of no-deal. The truth is that we just don’t know what will happen and commentators far better qualified than us are struggling to make concrete predictions. However, while the first part of this blog makes for pretty gloomy reading, it’s worth considering the form.

The housing market has rallied quickly after far more serious economic shocks than Brexit (2008 being the obvious example) and long-term trends are positive. It’s a little early to be making bold predictions, but just maybe our worst fears might turn out to be little more than that.


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