HM Treasury (HMT) have published the results of their consultation on the UK’s implementation of European Union (EU) Regulations 44/2009 and 45/2009, requiring Currency Exchange Offices and Money Transmitters to have procedures in place selectively to check euro notes and coins using an approved method.

Following the consultation, the Government has decided to create a new criminal offence for failure to comply with the checking requirements of the EU regulations in relation to counterfeit euros.

You can read the full report by following the link below.

UK enforcement measures for EU Regulations 44/2009 and 45/2009 on counterfeit euros on the HMT website (Opens new window)

Former ATT President

As a result the Treasury has announced that stocktakers who do not carry out bookkeeping or other accountancy services will be exempt from the Money Laundering Regulations (MLR) 2007 from Saturday 1 October 2011.

This means that they will no longer need to register with HMRC.

This decision also supports the Government’s policy of reducing regulatory burdens on businesses.

HMRC continue to encourage stocktakers to be diligent and report suspicious activity to the Serious Organised Crime Agency (SOCA). More information can be found at www.soca.gov.uk.

Stocktakers who offer bookkeeping or other accountancy services will stay on HMRC’s register.

From Monday 3 October 2011 HMRC will be writing to the stocktaking businesses already registered with them to give the opportunity to de-register for MLR.

If you do not receive a letter from HMRC but wish to deregister, you should write to the registration team to let them know. Your letter should include details of your registration number and the reason you wish to deregister.

The address for applications to deregister is:

MLR Registration Team
7th Floor Central
Alexander House
Southend on Sea
Essex
SS99 1AG

It separates itself from the obvious areas from which FATF will review their 40 recommendations such as PEP’s and expansion of the regime. These changes will result in the 4th Directive; however with a proposed implementation date of 1 April 2012 we could be in for two sets of new regulations in a short space of time.

After going through the document there is lots of discussions. However the main ones are

• Removal of criminal sanctions
• Increase supervisor powers to mitigate the risk of the removal of the above
• Reliance to be extended to all professional bodies in Schedule 3
• De-minimus exclusion to small businesses of euro 15,000 or below annual turnover
• UK estate agents selling offshore property to be bought into the Regulations, though not letting agents
• Powers for all supervisors to impose penalties when not allowed to enter business premises
• Powers to impose penalties for unreasonable behaviour to provide information
• Supervisor powers to enforce payment of fees and powers of de-registration
• More freedom for the exchange of information for supervisors.

There are a lot of general discussions surrounding policies and procedures and general guidance coupled with the risk based approach and the various sectors. Generally it is perceived that it is not so much as “on the shelf” guidance that does any good but those that promote active participation, the ‘toolkits’, that works. In 7.11 on this subject, I think I can take some pride here, since I believe they may be talking about the one I wrote for one of the supervisors and which is possibly going to adopted by two more.

In reality the document is a reinforcement of the risk based approach, almost a plea to work in that less rigid way, the end of the tick box approach whilst working without fear of prosecution if we should not always get it right. An approach that can only be undertaken if law enforcement, our supervisors and the regulated businesses themselves work towards the same outcome together. If achieved, it should increase compliance at a reduced cost.

The register is a useful tool for sharing intelligence about businesses which might be used for money laundering and will help HMRC with its work ensuring compliance and supervision of the Money Laundering Regulations. In particular, it will help law enforcement agencies differentiate between MSBs complicit in money laundering or terrorist financing and those who are complying with the Regulations. In a recent case, for example, the manager of a bureau de change was found to be involved in laundering millions of pounds made from drug trafficking.

If the pilot is successful access to the register will given to law enforcement agencies across the country.

The normal risk based approach and customer due diligence measures must be applied by money transmitters when an individual is sending their own money to either family members or to a relief organisation in Pakistan.

If money collected by a charity or religious organisation is being sent we recommend that you do the following.

• Check the identity of the person arranging to send the money.
• Obtain the name and address of the charity or religious body.
• Check on the Charity Commission website (Opens new window) to confirm the organisation is a registered charity and obtain confirmation that the person is a genuine representative of the charity or religious organisation. Many of the charitable and religious organisations with links to Pakistan are registered with the Charity Commission.

If the organisation is not on the register you may still undertake the transaction but you should make further enquiries to satisfy yourself that the money being transmitted is not terrorist financing or the proceeds of crime.

The further enquiries could include questions about how the money was collected and enquiring about who it is being sent to. If after making further enquiries you are not satisfied that this is genuine you should consider making a suspicious activity report to the Serious Organised Crime Agency.

It does come as no surprise, therefore, that the Financial Services Authority (FSA) has recently censured and banned three directors from acting as senior managers for failing to meet their supervisory standards. The FSA investigation found that the directors had been relying too heavily on external consultants for advice on how to run their business.

It is equally unsurprising then that HM Revenue & Customs (HMRC) have also announced that they take the same view to the FSA in relation to businesses meeting their obligations under the Money Laundering Regulations.

HMRC also state that they have no objections to businesses getting advice from external consultants regarding their obligations under the Regulations, as long as the responsibility for complying with the Regulations remains on the business rather than any consultant.

What does come as a surprise is that some consultants, who should frankly understand the Regulations better, have recently offered their services to act as the Nominated Officer for a business. HMRC has no formally announced that it does not consider that a consultant outside the business can be appointed Nominated Officer for any of the businesses HMRC supervise under the Regulations.

The new guides will be available on-line only. This follows on from HMRC’s announcement on 12 April 2010 that they would stop sending printed copies of Public Notice MLR8 to businesses we supervise and publish MLR8 on the internet only. All relevant businesses should now refer to the internet when they need to check anti money laundering guidance. Printed copies of the current Public Notice MLR8 Preventing money laundering and terrorist financing dated August 2008 have now been withdrawn.

The new anti money laundering guides are as follows:

• Anti money laundering guidance for Money Service Businesses
• Anti money laundering guidance for High Value Dealers
• Anti money laundering guidance for Trust or Company Service Providers

The guidance should make it easier for businesses to understand what is required of them under the Money Laundering Regulations and other legislation.

Money Service Businesses (MSBs) should note that the Counter-Terrorism Act guidance has been incorporated into the ‘Anti money laundering guidance for Money Service Businesses’ this is available at Appendix 7 of the guidance. This will assist them in complying with the terms of a direction which is a legal requirement.

MSBs should also be aware that guidance for E-money issuers will be incorporated and published in the new guidance shortly.

High Value Dealers should note that guidance on proliferation financing risks will be incorporated and published in the anti money laundering guidance for High Value Dealers shortly.

Accountancy Service Providers (ASPs) should continue to refer to the Consultative Committee of Accountancy Bodies (CCAB) guidance. HMRC are considering whether they can provide specific sectorial advice for Accountancy Service Providers on their Money Laundering Regulations website.

This would be a welcome move. Most professional bodies have already written simpler guidance than the CCAB, for the members they supervise and many will be aiming for HM Treasury approval for them. It would not seem wise to leave those in most need of simplified sector guidance with only the complex CCAB guidance to reply upon.

HMRC now state that between the four sectors they have responsibility for supervision they now have over 18,000 registered firms, of which just over 14,000 are accountancy service providers (ASP’s) or trust and company service providers (TCSP’s).

HMRC has not yet, in any force, started compliance visits to either TCSP’s or ASP’s, so therefore there compliance visits have been focused upon the remaining 6,000 money service businesses and high value dealers.

In just the eight month period between September 2009 and April 2010 HMRC compliance officers carried out 908 visits to businesses, this is a tremendous figure, with almost 15% of all firms having a visit in that period. This rate of supervision has to be commended; however, unless the rate must fall considering the sheer volume of ASP’s that must come under the supervision of HMRC.

The other interesting statistic to come from these visits was that 193 warning letters were issued, which is just over 21% of the firms visited. If you look at it from the opposite point of view, almost 80% of businesses visited had made good attempts at coping with aml compliance. That has to be good news.

HMRC now state that between the four sectors they have responsibility for supervision they now have over 18,000 registered firms, of which just over 12,000 are accountancy service providers (ASP’s).
HMRC in 2009, data mined tax return information and found that there are over 92,000 ASP’s, ranging from the small bookkeeper or payroll bureau to the major firm of Chartered Accountants.

When you actually work out who, from this total figure, is actually supervised by one of the other supervisory bodies, you find a massive short fall in registered firms.  For example, the ICAEW has around 16,500 firms it supervises, this is the largest of the accountancy bodies; the AAT for example has 3,500 generally smaller firms under its wing. In total you find that between the professional body supervisors they account for less than 38,000 of the total in the sector.

When you add in the 12,000 HMRC firms you find you have a short fall over around 42,000 firms, for whom, after one and a half years of committing a criminal offence by operating unregistered for AML supervision still carry on regardless.

With HMRC setting the starting penalty for non-registration at £5,000, you would think it would act as a deterrent. HMRC have been working in conjunction with the other supervisor bodies to work out who of the 92,000 is not currently registered. With HMRC’s policy of ‘policing the perimeter’, I believe that a lot of penalty notices will be hitting many a firms door mat by the end of 2010.