Regulation of Estate Agents & Other Schedule II Businesses

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Regulation of estate agents and other schedule II businesses- Propel FWD
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    Jersey and the Channel Islands have an enviable property market, and our respective Governments are keen to ensure that our islands’ reputation remains strong and competitive.  

    These are essential factors from both an environmental and an economic standpoint.  

    Maintaining robust regulation and best practices across our islands helps protect our society, contributes to our financial stability, and fosters economic growth.

    The estate agency sector in the UK has, in recent years, become the focus of negative news associated with observed practices that fell short of industry standards. This is regarding the conduct of certain Estate Agents involved in the sale and purchase of properties to Ultra High Net Worth Individuals (UHNWs).

    These subsequently, became the focus of criminal investigations regarding their Source of Wealth (“SOW”) and, in some instances, assets have been seized as the result of those inquiries using Unexplained Wealth Orders, imposed by the UK Courts.

    Indeed, these events were a likely catalyst for the introduction of the UK’s Economic Crime Bill, recently passed through Parliament.

    The new legislation’s purpose is to ensure transparency associated with property transactions in the UK. It is also designed to provide more extraordinary powers to the UK authorities when dealing with these types of cases.

    In September 2021, the Jersey Estate Agents Association (“JEAA”) expressed concerns associated with a public survey about the estate agency market in Jersey.

    After that, the Jersey Government commissioned a review to determine whether there were estate agents to be regulated on the island.

    The Review concluded that it was appropriate to introduce regulation to the estate agency market in Jersey to bring the standards and requirements expected of Jersey estate agents into alignment with their UK counterparts.

    Notwithstanding the above, all Jersey Estate Agents are required to register with the Jersey Financial Services Commission (“JFSC”) following the provisions of the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 and also comply with Schedule 2 of the Proceeds of Crime (Jersey) Law 1999 (as amended).

    The Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008 has specific provisions for estate agents concerning anti-money laundering and the counter-financing of terrorism following Schedule II Regulatory requirements (also applicable to High-Value dealers, which include (but are not limited) to: Antiquities, Jewellery and Motor Vehicles).

    Estate Agents are also bound by the Consumer Protection (Unfair Practices) (Jersey) Law 2018 (Consumer Protection Law), which predominantly deals with criminal offences and applies to all business sectors in Jersey.
    Once licensed, firms are obligated to comply with the legal and regulatory framework set out in Section 14 of the JFSC AML/CFT Handbook (recently updated on 31st March 2022).

    Navigating the Regulatory Path

    Understanding the legal and regulatory environment is key to navigating their requirements to ensure your firm remains compliant.

    The introduction of new regulation across any industry will, undoubtedly, have a varied impact upon business sectors, not all of which, may necessarily be perceived as positive will vary, depending upon several factors, such as the:

    • business size;
    • existing governance arrangements;
    • the recency of change;
    • the complexity of the regulation;
    • the level of regulation in the sector;
    • the reach of the regulation; and
    • the risks associated with non-compliance;

    Of course, the other challenges that may also be present include, the cost of achieving compliance with the new regulatory regime.
    The impact of regulations upon individual businesses may also influence decisions they make about how to implement them; for example, the degree of help sought and the stance towards compliance adopted (i.e. aiming for compliance or aiming to achieve a level over and above compliance) often feature.

    Key legal and regulatory developments in Jersey

    On 27th April 2022, the Proceeds of Crime (Jersey) Law 1999 (amendment 7) was passed by the States of Jersey.

    The significance of this change is very relevant to all regulated sectors in Jersey. The impact of this change is broad in that it now incorporates an offence of – Failure to prevent money laundering and terrorist financing.

    New Article 35A (offence of Failure to prevent money laundering)

    This new article will affect Schedule II businesses and includes: –

    • Lawyers, Accountants, Estate Agents, and High-Value dealers.

    What does this mean in practice? 

    In practice, this means that Estate Agent, together with any Schedule II business that does not have adequate policies, procedures and internal controls designed to prevent financial crimes, such as money laundering and terrorist financing, may fall foul of the new legal and regulatory obligations. 

    In addition, last week, the JFSC announced that it has already started to schedule meetings with several local businesses to conduct assessments. 

    Navigating the legal and regulatory environment may often appear like a daunting exercise. Our team of professionals are well-positioned to assist you and your firm in achieving its compliance goals and objectives.

    Our new Health-Check Assessments are designed to evaluate your business compliance levels and identify gaps. Following this phase, a full resolution report can be provided to you, showing you a way to fill the gaps and get you on the way to meeting the requirements JFSC look for.

    Check out the Financial regulatory services and see how we can help you avoid sanctions from the JFSC and other financial regulators.

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