ECSH52050 - Why do the Money Laundering Regulations include Trust or Company Service Providers

Money laundering takes many forms. The services provided by TCSPs can be used to help obscure the identity of beneficial owners and support the channelling of illicit funds through layers of corporate structure, hiding their true criminal origin. 

Corporate structures are used globally for money laundering schemes, particularly where they offer a lack of transparency that can be exploited to hide beneficial ownership. UK companies and partnerships are likely to be attractive for money laundering due to the UK’s international reputation for trade and finance and upholding the rule of law. This means those TCSPs who form firms are at risk of these services being exploited for criminal purposes. Beyond firm formation, TCSP services are attractive for money laundering as they provide opportunity to exploit corporate solutions primarily aimed at supporting UK businesses. They also offer criminals the opportunity to:

  • Facilitate fraudulent or illicit business activity.
  • Conceal the identities of those controlling organised criminal operations.

The nature of TCSP services mean they are both offered and sought by a range of businesses spanning many UK industries. The risk of their exploitation is widespread. A TCSP may not routinely deal directly with a customer’s funds however they are well placed to consider the money laundering, terrorist financing and proliferation financing risks presented by:

  • The people they deal with.
  • The services they are asked to provide.
  • How they will be used.

TCSP businesses provide the services listed in TCSP Introduction and enter into a business relationship with all their customers. Through this relationship, the TCSP may gain access to information that could give them reason to suspect money laundering or terrorist/proliferation financing activity.

The Money Laundering Regulations 2007 extended the scope of The Money Laundering Regulations 2003 to the TCSP sector with effect from 15 December 2007, when the sector was placed under the responsibility of HMRC as a statutory supervisor, unless the TCSP is supervised by the Financial Conduct Authority (FCA) or one of the Professional Bodies (PBs) listed in Schedule 1 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) which act as Professional Body Supervisors (PBSs).  This position remains unchanged under MLR 2017 (though under an amendment, HMRC is also responsible for maintaining a register of all supervised UK TCSPs).

In addition, the business and its beneficial owners, officers and managers (BOOMs) as defined in MLR 2017are required to be determined as fit and proper persons before the business can be added to the Supervised Business Register and is able to legally carry out activity as a TCSP.

Where a TCSP is supervised by a PBS, this information is maintained by HMRC on a register (the ‘TCSP Register’) of all supervised UK TCSPs. Regulation 58 MLR 2017 requires that HMRC consult the PBS and may rely on the PBS’s determination, as to whether or not that TCSP business and its BOOMs are fit and proper persons. Further information on the TCSP Register is available in ECSH52075.