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HMRC internal manual

Money Laundering Regulations: Compliance

HM Revenue & Customs
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Business sector specific Guidance: Money Service Businesses: How does a Money Transmitter operate?

Money transmitters offer convenient low cost worldwide remittance for their customers. They usually have lower operating costs so commission rates are low (0.25% to 1.25%) and exchange rates are generally more attractive than the banks or larger money transmitters.

There are many different ways these businesses are able to ‘transmit’ money. They may not use the formal banking systems exclusively to transmit the money to its destination. They may use methods that by-pass or only partially use the banking system and use a trust-based system of swapping financial liability.

In order to avoid exchange controls operating within a country, a business within that country may agree to pay a Money Transmitter’s customers for them. The business will ask for an equivalent amount in another currency to be paid into a bank account held outside that country in their name. Frequently the business paying out money will request payment in dollars, so they can pay for goods purchased on the open market.

It is important that you concentrate on identifying the audit trail of the money transfer in order to identify non-compliance with the regulations. Do not get distracted trying to identify whether the system is informal or formal.

The records vary. They may consist of a logbook of all the transactions taken day to day, copies of faxes to other Money Transmitters and their counterpart in another country, bank statements and chequebooks. An example of a typical logbook layout is shown below.

Serial Number Customer Details (name and address) Receivers details (name and address) Amount received(£) Commission Rate Amount to be paid out in local currency