Legal Village

Hoping for a HIP replacement - but money laundering uncertainty continues

Posted 14/06/2007 by Fiona Woolf

No quicker than we’d finished saying ‘HIP-HIP hooray’ to the delayed introduction of the Home Information Pack, we had some more good news on another change of heart by the Government, this time on the money laundering regulations.

A few months ago, the Treasury was insistent that its hands were tied; the definition of ‘beneficial ownership’ in the regulations had to be the same as the one in the European directive and any problems on how to interpret that was a matter for professional bodies to give guidance on. This was not a position the Law Society could begin to accept on behalf of our members or the regulated sector as a whole. Guidance has no proper legal status to protect us against committing a crime!

Following a meeting with a number of key City firms, which I chaired in March, we swung into action, obtaining an opinion from Matrix Chambers head Rabinder Singh QC that fully supported the Law Society’s position: the lack of clarity in the definitions was unlawful and providing guidance on such regulations was constitutionally prohibited. This opinion was quickly despatched to the Treasury and the Attorney-General.

The Law Society then upped the ante. Our permanent office in Brussels maintains continual dialogue with contacts within the European Commission and the European Parliament, allowing us to raise issues that affect UK solicitors in all areas of European policy and regulation. We needed to make members of the Commission aware of the potential for the directive’s implementation in the UK to be undermined by the Treasury’s approach to beneficial ownership. Our Brussels staff met with European representatives to explain our concerns and I wrote to Commissioner McCreevey to seek his assistance in ensuring that the implementation of the directive in the UK would be effective and workable.

McCreevey has since advised us that in regular implementation meetings with the UK, Treasury officials were reassured that the most important thing was to ensure that the regulations where clear, workable and lawful. They could use whatever wording was required in order to implement the intent of the directive and did not have to use the same language. At the same time, the Attorney-General advised me that he had ensured that the Treasury was aware of the need for the regulations to be lawful when placed before Parliament and therefore required a further definition.

As a result, on 4 June I met with economic secretary Ed Balls to receive the very positive news that an extended definition would be provided and that what the Law Society had asked for would, essentially, be delivered. Law Society staff are currently reviewing the proposed definition in consultation with practitioners and other representative bodies but I can say we are optimistic the clarity required for the definition to be practical and proportionate can be achieved.

It’s pleasing that our heavy lifting on both money laundering and HIPs has delivered results. We consistently opposed the introduction of HIPs and warned the Government goodness knows how many times of the potentially disastrous ramifications on the housing market.

Without a crystal ball it’s difficult to predict what will happen with HIPs. What we do know is that there is a great deal of confusion and uncertainty in the market and that you are probably hearing a number of differing views from pack providers and others in the industry about what is likely to happen. The deputy vice president wrote to practitioners last week with the advice to continue with your plans to offer HIPs if you routinely deal with four-bed properties.

However, firms should not feel pressured into making decisions about pack provision or your engagement with the market until we have been able to seek clarification from the housing minister. The HIPs taskforce is monitoring the situation very carefully and is in touch with all key stakeholders to ensure you can rely on the Law Society to give you the facts in what is a very confused marketplace. As soon as we have any reliable information, we will let you know.
 
If the HIPs market does open on 1 August, we have ensured that you have access to the Law Society’s online HIP via MDA and SearchFlow are continuing to provide their training to make sure firms are ready for HIPs.

Despite the last-minute announcement by the Government, it is clear that many solicitors have followed the Law Society’s lead and engaged in the HIPs process. There is significant evidence that this has re-energised their relationships with clients and local agents, which is central to running a successful conveyancing practice. This could provide lasting benefits even if the Government is forced to abandon the whole idea of HIPs.