Tag: HMRC & Supervisory Issues

  • Memorandum of Understanding between HMRC and the FSA for joint supervision

    A Memorandum of Understanding between HMRC and the FSA was published on the FSA website on 1 June 2012. It’s about sharing information and joint visits. This will be of particular relevance to many money services businesses whom are supervised not just under the Money Laundering Regulations by HMRC but are also the FSA by the Payment Services Regulations.

    Businesses that are supervised by HMRC and the FSA will find this information useful. The memorandum documents the co-operation between the two organisations for monitoring and the execution of supervisory visits and functions.

    In preparing their Memorandum of Understanding the FSA and HMRC have had regard to the Statutory Code of Practice for Regulators1 which came into force on 6 April 2008. The Code sets out general principles by which regulatory activity should be undertaken, and provides the following guidance on the arrangements for collaboration between different regulators in paragraph 6.5 as follows:

    “Where two or more inspectors, whether from the same or different regulators, undertake planned inspections of the same regulated entity, regulators should have arrangements for collaboration to minimise burdens on the regulated entity, for example, through joint or co-ordinated inspections and data sharing”.

    Relevant businesses will have no increase in their burden for supervision, but enjoy a far more joined up approach from the supervisory authorities helping to ease the process.

    The Memorandum details co-operation concerning;

    • The disclosure of confidential information
    • Single points of contact
    • Joint visits

    The full document can be found by clicking on the following link;

    Memorandum of Understanding between HMRC and the FSA (PDF 54K) (Opens new window)

  • Coutts fined for failings in money laundering controls

    Private bank Coutts has been fined £8.75m by the Financial Services Authority (FSA) for not taking adequate measures to prevent money laundering. The FSA said the failings “resulted in an unacceptable risk of Coutts handling the proceeds of crime”.

    The findings related to high-risk people, especially those whose political positions meant they were vulnerable to corruption. Coutts clients include the Queen, pop stars and sports personalities. It is owned by Royal Bank of Scotland.

    Coutts agreed to settle at an early stage in the process. It said it was confident that its anti-money laundering processes were now robust.

    “Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings,” said Rory Tapner, chief executive of the wealth division of Royal Bank of Scotland. “We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”

    The fine followed the FSA’s visit to Coutts in October 2010 as part of its review into how banks were managing situations in which there was a high risk of money laundering. The regulator said that Coutts had failed to check the source of funds when prospective new clients tried to open accounts. It also failed to check up on any intelligence about its existing or prospective clients and had not kept information on those clients up to date.

    The FSA said there had been deficiencies in nearly three quarters of high-risk customers’ files.

    “Coutts’ failings were significant, widespread and unacceptable,” said Tracey McDermott, the FSA’s acting director of enforcement and financial crime. “Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.”

  • Identifying counterfeit euros

    Identifying counterfeit euros – consultation decision

    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)

  • ICAEW Disciplinary Consent order made on 3 October 2011

    The followng consent orderwas made by the ICAEW investigation committee

    With the agreement of Richard Braysher of 2 High Road, Eastcote, Pinner, Middlesex, HA5 2EW, the Investigation Committee made an order that the member be severely reprimanded, fined £5,000 and pay costs of £1,280 with respect to a complaint that:

    1 Between 28 September and 3 March 2010 Mr Braysher failed to comply with written assurances he had given on or about 28 September 2006 following a Quality Assurance Visit that he would:

    Under the Money Laundering Regulations 2007:
    a. have procedures in place to perform on-going client due diligence;
    b. attend external training on the money laundering regulations and;
    c. undertake a compliance review.

  • 01.09.11 Money Laundering Regulations cease to apply to stocktakers from 1 October 2011

    As part of its review of the Money Laundering Regulations and in order to ensure its effective and proportionate implementation by businesses in the UK, the Treasury has reviewed the risk of money laundering and terrorist finance with HMRC and the Institute of Licensed Trade Stock Auditors.

    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

  • 12.05.11 ICAEW Fine Accountant £5,000 for breach

    At a Disciplininary Council meeting a Mr P R Honeywell FCA was found to have failed to comply with Money Laundering Regulations2007 in that, following a practice assurance visit, he failed to:
    (i) document a client due diligence review; and
    (ii) identify clients for whom his firm, Honeywell (Monmouth) Limited, provides payroll services.

    On 18 June 2010 the case manager wrote to Mr Honeywell asking him to provide additional information to address the outstanding issues arising from the visit. These are summarised as follows:

    Details of the steps he has taken to establish the adequacy of the money laundering procedures undertaken by social services on clients that are referred to him and the basis on which he is able to rely on these procedures

    Just before the hearing day, the defendant’s solicitors wrote to the tribunal putting forward various points said to be in mitigation. This included that the Practice Assurance visit had ‘passed’ the defendant’s practice in most aspects and that it was unrealistic to expect the Money Laundering Regulations to apply in relation to clients in receipt of social services funding for their care.

    The tribunal did not view either of these points as mitigation. First, Chartered Accountants can be expected to comply with professional standards and partial compliance does not excuse what amounted to a wilful refusal to cooperate with the ICAEW with regard to the areas of non-compliance. In relation to the Money Laundering Regulations, whilst the defendant’s conduct did not amount to the most serious of breaches, the defendant had failed to show any willingness to engage with the ICAEW on this. Had he done so and discussed how he could carry out a modified version of identity checks and thereby compliance, the tribunal might have been more sympathetic.

    It was the role of the ICAEW to maintain the standards amongst the profession of chartered accountancy. An important part of this is the Practice Assurance. An equally important part of a chartered accountant’s professional standards and indeed the protection of the public, is compliance of money laundering requirements. The defendant had fallen below the professional standards expected of chartered accountants.

    The tribunal ordered that Peter Royston Honeywell FCA be severely reprimanded, pay a fine of £5,000 and costs of £2294

  • 29.01.11 Pilot scheme to give law enforcement agencies access to MSB register

    A new scheme is being piloted to give police and other law enforcement agencies access to information held on HMRC’s Money Service Business (MSBs) register. Under the scheme each month agencies will be given details of all Money Service Businesses in their area held on the MSB register.

    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.

  • 30.11.10 Accountant fined £5,000 for a failure to report

    The ICAEW made the following regulatory decision in the following case for a failure to make a suspicious activity report in a timely basis

    Consent Orders made on 28 July 2010

    With the agreement of Michael Martin Shenker of 5Wellesley Court, Apsley Way,
    London NW2 7HF, the Investigation Committee made an order that the member be
    severely reprimanded, fined £5,000 and pay costs of £2,075 with respect to a
    complaint that:

    Between 7 June 2005 and 16 February 2006 Mr M M Shenker FCA failed to comply with
    statement 1.304 of the Members Handbook in that he failed to make a suspicious activity
    report on a timely basis to the National Crime Intelligence Service when he had a
    suspicion or reasonable grounds to suspect that Mr X’s activities in relation to the
    business of Y Limited were unlawful. D6496

  • 07.09.10 HMRC Guidance – Pakistan floods disaster – guidance on transmitting money

    The Government recognises the crucial importance of individual giving and charitable donations at times of humanitarian crisis such as the Pakistan floods and therefore understands and values people’s desire to give money. This underlines the importance of knowing that money sent with best intentions is not inadvertently finding its way into the wrong hands.

    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.

  • 10.08.10 External consultants cannot act as a Nominated Officer under Money Laundering Regulations

    As an external consultant I am usually in the situation where systems we devise for compliance starts with a simple policy statement, which firstly details who is and how to communicate with, the nominated officer, who will be a senior member of the firm, a director, partner or owner manager.  We remind firms of their responsibilities under the Money Laundering Regulations, It is after all their business and they must accept reasonability for its successful running.

    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.