Guidance

Money laundering supervision: the fit and proper test and HMRC approval

Find out about the checks carried out on individuals in your business when you apply to register with HMRC.

Introduction

The fit and proper test

HM Revenue and Customs (HMRC) carries out the test as part of the registration process for money services businesses or your trusts or company service providers.

The test is a series of checks that apply to you and relevant responsible people running your business to make sure that you meet the requirements of the Money Laundering Regulations.

Approval

Approval is a separate process from the fit and proper test. Before certain individuals can own or hold positions of authority in a business within the accountancy service provider, estate agency business and high value dealer sectors they need approval by HMRC.

Who the fit and proper test applies to

When you register your money service business or trust or company service, the responsible persons must be included in your application.

The fit and proper test also applies to agents of money service businesses and their responsible persons:

The test applies to:

  • the person applying to register the business
  • the person running the business either on their own or in partnership
  • officers of the business, including director and company secretary
  • senior managers who are engaged directly in the provision of regulated activity
  • the nominated officer
  • beneficial owners of the business
  • a person who is in effect directing the business
  • agents of money service businesses and their beneficial owners, officers and senior managers

If you fail the fit and proper test

If you can’t satisfy HMRC that you’re a responsible person regarding the risk of money laundering or terrorist financing you’ll fail the test.

We’ll ask for evidence of your honesty and integrity to prove you can understand and fulfil your obligations under the regulations.

To reach a decision we’ll consider a range of information including whether you:

  • are being investigated or have been convicted of money laundering or other offences involving dishonesty, fraud or financial crime
  • have been disqualified from acting as a company director
  • have been subject to a confiscation order under the Proceeds of Crime Act 2002
  • have a track record of consistent non-compliance with the Money Laundering Regulations, or with the EU Payments Regulation which applies to money transmission service providers
  • have been disciplined or expelled by another supervisor or professional body for regulatory or professional failings

If the person who fails the test is the nominated officer you can:

  • appoint someone else who already has fit and proper status
  • choose a new person to apply for the test

Who approval applies to

HMRC carries out approval checks when accountancy service providers, estate agency businesses and high value dealers register for money laundering supervision. Approval is similar to the fit and proper process but different checks are made.

The checks apply to certain individuals who own or hold positions of authority such as:

  • senior managers
  • officers
  • beneficial owners
  • sole practitioners

If you fail approval

You’ll fail approval if you’ve committed an offence under schedule 3 of the Money Laundering Regulations.

HMRC won’t register your business if you fail the test and while you continue to occupy a position of authority. However you’re able to appoint another person.

When the fit and proper and approval tests take place

HMRC will carry out checks using the information you supply online when you apply to register for anti-money laundering supervision.

There’s no need to apply for a test each year. However if a new responsible person joins your business after you’ve registered you should sign in to the online service and add their details.

The test

HMRC will check the accuracy of the information you provide online.

This will include checking those details against information held by us, other regulatory authorities, government and law enforcement agencies.

We will contact you if we need you to send additional information or documents to confirm identification.

If you pass the test, HMRC will continue to monitor your fit and proper status.

We won’t register your business if any of the applicants fail the test.

Further guidance

You can find additional information about the checks that HMRC undertakes in the guidance on the fit and proper test and approval.

Published 25 February 2014
Last updated 30 June 2017 + show all updates
  1. Information has been added to explain what happens if applicants don't pass the HMRC approvals test.
  2. This guidance has been updated to reflect legislation changes effective from 26 June 2017. Information about the new approval process has been added.
  3. Money Laundering Regulations new fee structure and charges from 1 April 2015.
  4. First published.