Anti-money laundering guidance for supervised businesses

AMLG1100 - Guidance for all sectors: Introduction

1. Introduction

This guidance is written with the purpose of assisting relevant persons (businesses) to better understand their obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (referred to as the “Regulations” in this guidance) and to provide clarity to ensure that businesses take reasonable steps to avoid being at risk of money laundering, terrorist financing and proliferation financing.

This guidance provides an overview of the Regulations and sets out reasonable steps to assist businesses’ compliance with the requirements set out in the Regulations (which are known as “relevant requirements”).  Adherence to the principles set out in this guidance must be taken into account by His Majesty’s Revenue and Customs (HMRC) and will also assist the tribunals and courts when assessing whether a business has contravened a relevant requirement.

Where HMRC are satisfied that the business has taken all reasonable steps and exercised all due diligence, HMRC must not impose a penalty on or censure a business. The business’s ability to evidence reasonable steps and exercise of all due diligence will be assisted by demonstrating that it has adhered to the principles in this guidance.

HMRC expects businesses to adhere to the principles set out in this guidance, in line with the requirements of the Regulations. Departure from the principles will not automatically mean that the business has not taken reasonable steps to comply with a relevant requirement, if the business can evidence that their procedures and controls amounted to reasonable steps. Following this guidance does not that a business is fully compliant with its obligations under the Regulations: the guidance is not intended to provide a safe harbour and even strict compliance with the guidance will not necessarily amount to having taken reasonable steps or exercising all due diligence where the business faces particular risks arising from the unique nature of its own business that has not been addressed.

The onus will remain on a business, whilst taking a risk-based approach, to demonstrate that it has taken reasonable steps and exercised all due diligence to ensure compliance with the relevant requirements.

The Regulations

The Regulations aim to prevent your business from being used to launder money, finance terrorism and finance proliferation. This in turn contributes to tackling the serious economic and social harm from organised crime and reduces the threat from terrorism in the UK and around the globe.

The Regulations apply to persons acting in the course of business carried on in the UK in any of the business sectors that are specified in the Regulations and do not fall within any of the exemptions. These persons are referred to as relevant persons within the Regulations. Relevant persons’ business models can differ and may for example be a business, a partnership or a sole practitioner/trader.Businesses must comply with relevant requirements set out at Schedule 6 of the Regulations.

Relevant persons to whom this guidance applies are referred to as “you/your/the business” throughout this guidance 

You must register with HMRC for anti money laundering (AML) supervision if your business falls within any of the business sectors listed in section 1.1 below and is not already supervised for AML purposes by the Financial Conduct Authority (FCA), Gambling Commission (GC) or a Professional Body Supervisor (PBS) listed in schedule 1 of the Regulations (or subject to any of the exemptions set out in Regulation 15 of the Regulations).

If your business carries on activity in more than one supervised sector, you must ensure that you are correctly supervised for each of those sectors. This may mean that you require supervision by more than one supervisor, and you should follow the guidance issued by each of your supervisors for each sector.

1.1 Who is this Guidance for?

This guidance is for businesses in the nine sectors listed below that are supervised by HMRC.

• Art Market Participants (AMPs)
• Accountancy Service Providers (ASPs)
• Bill Payment Service Providers (BPSPs)
• Estate Agent Businesses (EABs)
• High Value Dealers (HVDs)
• Letting Agent Businesses (LABs)
• Money Service Businesses (MSBs)
• Telecommunications, Digital and IT payment service providers (TDITPSPs)
• Trust or Company Service Providers (TCSPs)

For further guidance on whether the Regulations apply to your business, please refer to AMLG1500 (Registration) and the sector-specific guidance in Part 2.

Some businesses are required to register with HMRC even though they are supervised by the FCA, GC or a PBS. Businesses that are registered with, but not supervised by HMRC, should follow any AML guidance issued by their supervisor and this guidance.

This guidance applies to all relevant persons including the following persons carrying on business activity in any sector listed above:

• Sole practitioners/traders.
• Beneficial owners, officers (including directors, money laundering reporting officers and nominated officers), managers and employees.
• Agents and franchisees.

Important note:  There is also separate guidance for ASPs from the Consultative Committee of Accountancy Bodies (CCAB) linked here: Accountancy sector. As well as taking into account this guidance, businesses that provide both accountancy services (ASP) and trust or company services (TCSP), and are supervised by HMRC, should follow the CCAB guidance for relevant ASP activity, and follow this guidance for relevant TCSP activity.

 

1.2 Why is this guidance important?

It is important for businesses to understand this guidance fully for the following main reasons:

• It will help you understand your obligations under the Regulations and provide clarity of HMRC’s expectations. If you fail to comply with the relevant requirements under the Regulations, you can be subject to criminal prosecution and/or civil penalties.

Following this guidance is also mandatory under specific Regulations, for example:

• Regulation 18 says that you must take this guidance into account when identifying and assessing the risks of money laundering and terrorist financing to which your business is exposed.
• Regulation 33 says that you must apply enhanced due diligence (EDD) measures in any case identified in this guidance as one where there is a high risk of money laundering or terrorist financing.

In deciding whether a business has contravened a relevant requirement, HMRC and the Courts must consider whether this guidance has been followed together with any relevant guidance issued by other supervisors or appropriate bodies which have been approved by HM Treasury. HMRC will also consider whether the business has followed any further guidance and information referred to within this guidance. 

If a business is found to have contravened a relevant requirement, HMRC will not issue a penalty if it is satisfied that the business has taken all reasonable steps and exercised all due diligence to comply with the relevant requirement. One of the reasonable steps HMRC expects a business to take to ensure compliance with the relevant requirement is to evidence that it has adhered to the principles in this guidance and any further guidance and information referred to within it.  

Alternatively, if an individual or a business is prosecuted for contravening a relevant requirement, when deciding if they have committed an offence, the court must consider whether they have adhered to the principles in this guidance, together with any relevant guidance issued by other supervisors or appropriate bodies and approved by the Treasury.

1.3 How to use this Guidance

The guidance provided by HMRC is in three parts.

• Part 1 of this guidance is generic guidance which applies to all of the above supervised business sectors supervised by HMRC.
• Part 2 provides guidance for a number of specific industry sectors, helping you apply the generic guidance contained in Part 1 to that specific sector.
• Part 3 of this guidance covers sector specific risks of money laundering, terrorist financing and proliferation financing and how to assess and understand those risks. Part 3 is HMRC’s risk assessment, published under Regulation 17.

You must ensure you read and understand all three parts relevant to the sectors your business operates in.

Key terms referred to in this guidance are marked in bold and defined in the glossary section.

In this guidance, the word 'must' indicates a mandatory legal requirement. The word 'should' is used as a recommendation of good practice and is the standard of compliance that HMRC expects to see from a business.

Important note: If there has been any departure from the expected standards set out in this guidance, HMRC will expect the business to be in a position to explain its reasons for any deviation from the guidance and why it considers its approach to be compliant with the relevant requirement.

 

1.4 What is money laundering?

Money laundering is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises. The primary offences related to money laundering are discussed below.

Money laundering can take many forms and various business sectors are vulnerable to being used for money laundering in different ways. For example, criminals can use a money service business to transfer the cash proceeds of crime to countries outside the UK. A common practice is to split transactions into small sums or to make a transfer of funds on behalf of somebody else. Other sector specific examples of different types and ways of money laundering can be found in Parts 2 and 3 of this guidance, and in the UK’s National Risk Assessment (see link in part 3).

Money laundering is illegal. The Proceeds of Crime Act 2002 (POCA), sets out the following primary offences related to money laundering:

• Section 327 - Concealing, disguising, converting, transferring, or removing criminal property from the UK.
• Section 328 - Entering into or becoming involved in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person.
• Section 329 - The acquisition, use and/or possession of criminal property.

Important notes: Businesses must report belief or suspicion of offences related to money laundering by making a Suspicious Activity Report (SAR) to the NCA as detailed in AMLG11100. Where the conditions in s.330 POCA are satisfied, a business in the supervised sector commits a criminal offence if it does not report suspicious activity by making a SAR to the National Crime Agency (NCA) as soon as reasonably practicable.

1.5 What is terrorist financing?

Terrorist financing involves providing financial support for terrorist activity. Where the proceeds of crime are used to fund terrorist activity, it may be directly linked to money laundering. Terrorist financing can also, however, be done through legitimate sources of funds, although the techniques used to do this may be similar to money laundering.

The Terrorism Act 2000 (TACT), Part 3, sets out the primary offences relating to terrorist financing. A person or an entity commits an offence of terrorist financing if they: 

• fund-raise or are involved in fund-raising, using or possessing money or other property for the purposes of terrorism, including money or resources of a proscribed organisation; 
• conceal, transfer, or remove from the jurisdiction, any money or other property used to finance terrorism;
• facilitate the retention or control of money, which is destined for, or is the proceeds of terrorism;   
• do not comply with a prohibition imposed by a freezing order or enable any other person to contravene the freezing order; or
• deal with, or make available, funds or economic resources which are owned, controlled by or benefitting a designated person (under the UK Sanctions List).

 

Important note: Where someone in your business knows or suspects, or has reasonable grounds for knowing or suspecting, that another person has committed an offence related to terrorist financing, they are legally required to report this to either the firm’s nominated officer or directly to the NCA or the police. A failure to do so is a criminal offence. See AMLG11100 for information on your obligations to report suspicious activity and how you can do this.

1.6 What is proliferation financing?

Proliferation Financing broadly means providing funds or financial services that will be used to develop, purchase and transport or deliver the following in breach of financial sanctions imposed by the United Nations:

• Chemical, biological, radiological or nuclear weapons (CBRN).
• CBRN-related goods and technology including dual use goods and technology for non-legitimate purposes.

Proliferation financing and the terms set out in the bullet points above are defined in Regulation 16A. The National Risk Assessment in relation to Proliferation financing published by HM Treasury (Risk assessment of proliferation financing) provides important information that you must take into account when assessing the risk of proliferation financing to which your business is subject.

HMRC also recommends that you consider Annex 15v of the guidance published by the Joint Money Laundering Steering Group (JMLSG) when assessing the risk of proliferation re

See section 1.7 below for further information on financial sanctions. 

1.7 Financial Sanctions

Financial sanctions can prohibit your business from carrying out transactions with, or in some cases, providing financial services to, an individual or entity. An individual or entity subject to financial sanctions is referred to as a ‘designated person’.

Financial sanctions come in many forms as they are developed in response to a given situation. The most common types of financial sanctions used in recent years are:

• Targeted asset freezes: these restrict designated persons’ access to funds and economic resources.
• Restrictions on a wide variety of financial markets and services: these can apply to named individuals and entities, specified groups, or entire sectors. To date these have taken the form of investment bans; restrictions on access to capital markets; and directions to cease banking relationships and activities.
• Directions to cease all business: these will specify the type of business and can apply to a specific person, group, sector or country.

Individuals and legal entities who are within or undertake activities within the UK’s territory must comply with the UK financial sanctions that are in force.

A breach of financial sanctions can result in a civil penalty, such as a fine, or criminal prosecution.

• The National crime Agency (‘NCA’) are responsible for criminal enforcement of financial sanctions breaches and certain offences are punishable upon conviction by up to 7 years in prison.
• Civil penalties for breach of financial sanctions are imposed by HMT via the Office for Financial Sanctions Implementation (‘OFSI’).   

OFSI is the authority responsible for implementing, and monitoring compliance with, financial sanctions. OFSI helps to ensure that these financial sanctions are properly understood through sanctions notices, guidance, and news releases. OFSI also publishes a list of those subject to financial sanctions imposed by the UK. The OFSI general guidance can be found here.

Important notes: You must report to OFSI as soon as practicable if you know or have reasonable cause to suspect that a designated person has committed an offence under the financial sanctions regulations. You should report any transactions carried out or services provided which are subject to any prohibition to persons subject to sanctions or if sanctioned persons try to use your services. Having in place and maintaining robust CDD procedures will help you to accurately screen customers against sanctions lists, where appropriate. See AMLG11300 and AMLG11400 for further guidance on CDD.   If you know or have ‘reasonable cause to suspect’ that you are in possession or control of, or are otherwise dealing with, the funds or economic resources of a designated person you must:  freeze them; and not deal with them or make them available to, or for the benefit of, the designated person, unless there is an exception in the legislation that you can rely on or you have a licence from OFSI. Reasonable cause to suspect refers to an objective test that asks whether there were factual circumstances from which an honest and reasonable person should have inferred knowledge or formed the suspicion. A breach of these requirements may result in a criminal prosecution or a financial penalty. OFSI has produced guidance on how and when to report breaches of sanctions which can be found here - Reporting information to OFSI – what to do - GOV.UK Other important information on sanctions can be found on the HMT (OFSI) Sanctions Notices, Guidance and News Releases webpage: Office of Financial Sanctions Implementation - GOV.UK Via this webpage you can also: Report a suspected breach Sign up for free email alerts View the current consolidated list of asset freeze targets and persons subject to financial sanctions.

1.8 Trade sanctions

Trade sanctions can include prohibitions on:

• The import, export, transfer, movement, making available or acquisition of goods and technology.
• The provision or procurement of services related to goods and technology.
• The provision or procurement of certain other non-financial services;
• The involvement of UK persons in these activities; and
• Professional and business services.

The Russian invasion of Ukraine saw an increase in the use of sanctions in relation to professional services.  Restrictions were imposed in relation to the provision of certain services provided by ASPs or TCSPs in relation to persons connected with Russia (see Complying with professional and business services sanctions related to Russia - GOV.UK for accountancy services and section 8 of the Financial sanctions guidance for Russia - GOV.UK for trust services).

HMRC is responsible for the criminal enforcement of all trade sanctions measures and enforces trade sanctions on goods crossing the border in line with its function as the UK’s customs body.

The Office of Trade Sanctions Implementation (OTSI), part of the Department for Business and Trade (‘DBT’), was launched in October 2024 to assist companies in complying with trade sanctions regimes, including services sanctions, with power to investigate breaches, issues civil penalties and, in appropriate cases, refer cases to HMRC for criminal investigation. Their purpose is to strengthen the UK’s implementation and enforcement of trade sanctions.

Trade sanctions apply to: 

• All individuals or businesses within the territory and territorial sea of the UK; and  
• All UK nationals or UK businesses established under UK law, wherever they are in the world. 

This means that both HMRC and OTSI can investigate suspected breaches committed by: 

• Individuals and legal entities who are within, or undertake activities within, the UK’s territory; and 
• UK individuals and legal entities established under UK law, regardless of where in the world the breach takes place.

OTSI have produced guidance for businesses concerning trade sanctions which can be found here - Trade sanctions: civil enforcement - GOV.UK

A breach of trade sanctions may result in a criminal prosecution or a financial penalty.

Knowledge of trade sanctions is important for all supervised businesses due to the reporting requirements.

Important notes: MSBs have a legal obligation to report suspected breaches of trade sanctions. This is set out in the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024, which provide further details about whom the legal obligation to report a breach falls on. MSBs must report when they have knowledge, or reasonable cause to suspect, that a breach of trade sanctions has occurred. This knowledge or reasonable cause to suspect must be acquired in the course of carrying out your business. You must make an initial report as soon as practicable. You may then supplement this with further information afterwards. Report a suspected breach of trade sanctions – GOV.UK.