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of the current Public Notice MLR8 Preventing money laundering and terrorist financing dated August 2008 have now been withdrawn.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.

A First-tier Tribunal (Tax Chamber) decision regarding registration of businesses under the Money Laundering regulations 2003 has now been published.

The Appellant had claimed that it was not liable to register with HMRC under the Money Laundering Regulations 2003 because it was not carrying out any business as a money transmitter in the UK and any money transfer services in the UK were operated by its UK agents. The Tribunal, however, has dismissed this appeal and ruled that the appellant did carry on a money service business in the UK and carried that business on at each branch of its agents or sub-agents.

The appellant is therefore required to register with HMRC and pay a fee to HMRC for all premises where they had agents carrying on business on their behalf.

This confirms the present position concerning registration.

HMRC announce that a new late registration penalties policy has been introduced for Money Service Businesses, (MSBs) High Value Dealers, (HVDs) Trust or Company Service Providers, (TCSPs) and Accountancy Service Providers (ASPs).

Should businesses fail to register with HMRC they will be liable to a fixed penalty and any unpaid fees. These penalties only apply to businesses that must be registered with HMRC.

The new late registration penalty will be based on fixed penalty and any unpaid fees. This fixed penalty had been set at a £5,000. HMRC may issue a reduced penalty to businesses who notify them that they have been operating without being registered with us. This partial voluntary disclosure may lead to reductions in the penalty up to 70%.  

Additional information for Trust of Company Service Providers and Accountancy Service Providers

From 01 April 2010 Trust or Company Service Providers and Accountancy Service Providers who have not registered with us will be liable to a penalty or prosecution.

If you send HMRC your completed application form and appropriate fees without further delay you may be given a reduced penalty. Under the Money Laundering Regulations Trust and Company Service Providers also have to apply for a ‘fit and proper’ test as part of the registration process.

If you are a Trust or Company Service Provider which should be registered with HMRC but cannot submit all completed fit and proper forms, then you should at least send us application form MLR 100 immediately.

Send the completed F&P forms with the fee as soon as possible thereafter because, without them, your application is not complete. Forms and fees should be sent, along with a brief note explaining why your application is late and/or incomplete, to:

Money Laundering Regulations Registration Team
HM Revenue and Customs
7th Floor, Alexander House
21 Victoria Avenue
Southend-on-Sea
SS99 1AG

HM Treasury

HM Treasury today issues a Statement on Money Laundering controls in Overseas Jurisdictions  

The notice constitutes advice issued by HM Treasury about risks posed by unsatisfactory money laundering controls in a number of jurisdictions.

The Money Laundering Regulations 2007 require firms to put in place policies, procedures or systems in order to prevent money laundering or terrorist financing. Regulated businesses are also required to apply enhanced customer due diligence and enhanced ongoing monitoring on a risk-sensitive basis in certain defined situations and in “any other situation which by its nature can present a higher risk of money laundering or terrorist financing”.

This advice is in two parts, A and B. This advice is especially relevant if you conduct any business with any of the jurisdictions referred to in Part A or Part B or businesses based in those jurisdictions.

This advice supersedes previous advice issued by HM Treasury in connection with deficiencies in these areas.

Part A

On 18^th February 2010 the Financial Action Task Force (FATF) issued a public statement drawing attention to serious deficiencies in

• Iran,  
• Angola, the Democratic People’s Republic of Korea (DPRK), Ecuador and Ethiopia 
• Pakistan, Turkmenistan, and São Tomé and Príncipe.

 The UK fully supports the work of the FATF on these matters and HM Treasury agrees with the FATF’s assessments.

 IRAN

All UK businesses regulated under the Money Laundering Regulations 2007, whether financial institutions or other regulated persons should treat transactions associated with Iran as situations that by their nature can present a higher risk of money laundering or terrorist financing, and which therefore require increased scrutiny, enhanced due diligence, and ongoing monitoring, particularly in the case of correspondent relationships.

All other persons authorised by the Financial Services Authority should also take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

ANGOLA, THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA (DPRK), ECUADOR AND ETHIOPIA

The attention of UK financial institutions and other persons regulated for money-laundering purposes is also drawn to the FATF statement in respect of Angola, the Democratic People’s Republic of Korea (DPRK), Ecuador and Ethiopia, and the risks that they present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

PAKISTAN, TURKMENISTAN, AND SÃO TOMÉ AND PRÍNCIPE

The FATF has also drawn attention to the continuing AML/CTF deficiencies in Pakistan, Turkmenistan, and São Tomé and Príncipe.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is therefore drawn to the FATF statements in respect of those jurisdictions, and the risks that they continue to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

Part B

In a separate statement on the ongoing process to improve global anti-money laundering and countering terrorist finance (AML/CTF) compliance the FATF has also drawn attention to deficiencies in the AML/CTF regimes in the following jurisdictions; Antigua and Barbuda, Azerbaijan, Bolivia, Greece, Indonesia, Kenya, Morocco, Myanmar, Nepal, Nigeria, Paraguay, Qatar, Sri Lanka, Sudan, Syria, Trinidad and Tobago, Thailand, Turkey, Ukraine and Yemen.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is drawn to the FATF statements in respect of each of those jurisdictions. They should take this advice into account in respect of their systems and controls to counter financial crime.

This FATF statement is available at: http://www.fatf-gafi.org/dataoecd/34/28/44636196.pdf

The Money Laundering Regulations supervisory regime is run on a cost recovery basis and the fees paid by customers cover the expense of running the operation. HMRC costs include registering new businesses, contacting and visiting businesses, running an effective risk system, maintaining the register and producing guidance and information for customers.

This account summarises the resources that have been applied and generated in providing services and managing the HM Revenue & Customs (HMRC) Money Laundering Regulations supervisory regime for the year ending 31 March 2009. The figures are consistent with the HMRC 2008-09 Resource Accounts prepared in accordance with UK GAAP.

Notes: The £1,496,564 deficit for the year results from a large fee being challenged. HMRC have not included the amount under challenge within the above figures to maintain consistency with audited HMRC figures. However, HMRC have issued a statement of demand for the amount and are pursuing payment during 2009-10.

Introduced in 2002, the fee was initially set at £100, and was subsequently reduced to £60 from June 2003. There were no changes until 1 June 2007, when the fee was increased to £95; this level was maintained in 2008, and increased to £120 in 2009.

When finished it will allow for a MSB online registration check service, for both the profession and the general public to check they are dealing with a ‘registered’ firm. This is part of the supervisory strategy for policing the perimeter of the regulated sector. Those MSB firms not registered are committing an offence and this allows for checking and the subsequent reporting to HMRC of these businesses. 

When the register is complete and is available HMRC will let all know through a further announcement on their website. This same process will may apply to both Trust and Company Service Providers (TCSP’s) and Accountancy Service Providers (ASP’s) in 2010 or beyond.

Visit the BTC website for compliance help and support for firms in the regulated sector