ECSH63190 - Regulation 4 - Meaning of business relationship

Category Heading	Description
The Law	https://www.legislation.gov.uk/uksi/2017/692/regulation/4
What it means	A relevant person is deemed to enter into a business relationship with a customer when it (a) engages with a customer in connection with the relevant person's supervised activity and (b) there is expected to be an element of duration.  If the transaction isn't carried out as part of a business relationship, it is an "occasional transaction" as set out in the General interpretation in Regulation 3.
Purpose	The relationship between a business and its customer(s) will dictate which of the MLRs apply to a transaction.
Time Line	This was also requirement under MLR2007 (regulation 2). There was a similar requirement in MLR2003 but ongoing business relationships formed prior to supervision were out of scope.
What to establish	4(1)(a) - Does the activity arise out of the  relevant person's business? Applies to all sectors.   4(1)(b) - Is there an expectation by the relevant person, at the time contact is established, that there will be an element of duration? Applies to all sectors.  4(2) - Is the formation of a company the only service for the customer? If yes, it is a business relationship. Applies to TCSPs only.  4(3) - Has a purchaser's offer been accepted? If yes, it is a business relationship. Applies to EABs only.  Is it an 'occasional transaction'? If yes, it is not a business relationship.
How to test compliance and evidence to obtain	Ask the relevant person/business to explain the relevant (supervised) activities being undertaken and the relationship between the relevant person/business and its customers. Obtain copies of contracts, T&Cs, agreements etc.  Note: the contract may not be in writing, in which case the evidence may be within correspondence or agreed notes of meeting.
Best Practice	Sector specific information:
AMP	Usually not a business relationship for one off-purchases of art. Might be if there is a contract to provide regular services (such as to source multiple paintings) or if customers have credit or loan arrangements. Receiving regular marketing material or attending events, such as gallery openings does not constitute a business relationship. See para 56 of BAMF AML guidance
ASP	A business relationship is usually established with all clients. See Section 5 of CCAB AML Guidance 2020
EAB	A business relationship is established with both the buyer and the seller of a property when a contractual relationship is formed. See para 4.9 of EAB Guidance  The regulation defines that a business relationship is established with the purchaser at the point when their offer is accepted by the seller .