Introduction: Overview of anti-money laundering and counter terrorist financing regime
The European Union’s 3rd Money Laundering Directive introduced a number of changes to measures already in place to tackle money laundering. This resulted in the introduction of the Money Laundering Regulations 2007. Regulation (EC) on information on the payer accompanying transfers of funds for Money Service Businesses was put in place to ensure that a special recommendation made by the Financial Action Task Force was implemented across the EU.
Under the new Regulations, we remain the supervisory authority for Money Service Businesses (MSBs) and High Value Dealers (HVDs) and have become the default supervisor for Trust or Company Service Providers (TCSPs) e.g., company formation agents, business accommodation address providers. Company directors, company secretaries, trustees and Accountancy Service Providers (ASPs) e.g. external accountants, tax advisers and bookkeepers. The FSA and a number of professional bodies are also supervisors for ASPs and TCSPs. Although these sectors were within the scope of the MLRs 2007 not all TCSPs or ASPs were supervised and the definitions of the businesses within the TCSP sector were not clear.
The 2007 Regulations introduce the fit and proper test for MSBs and TCSPs which requires owners and other key personnel to have checks on their suitability to carry out relevant business.
We rely on businesses to put in place risk sensitive anti-money laundering policies and procedures to prevent their businesses from being used by money launderers and terrorists and to identify and report suspicious activity to the Serious Organised Crime Agency (SOCA).
Our aim is to work with businesses to help them with this important task.
We will do this by helping them to understand anti-money laundering legislation, encouraging them to comply with anti-money laundering legislation and making them aware of any simplified procedures and making sure they use them.
The Regulations say that a business must put in place risk-sensitive anti money laundering policies and procedures and that many of the customer due diligence checks must be done on a “risk sensitive basis”. This requires the adoption of a risk-based approach, which was recommended in the 3rd Money Laundering Directive.
HMRC will apply a risk-based approach to supervision by using information from different sources to help us decide where to focus our resources and which businesses we will visit to check and improve their compliance with the Regulations.
Regulation 42 of the Money Laundering Regulations allows us to impose a penalty “of such amount as we consider appropriate”. This removes the £5000 limit in the 2003 MLR and brings us in line with the Financial Services Authority (FSA) and the Office of Fair Trading (OFT). Full details about the way HMRC determine what is an appropriate penalty can be found in our penalties guidance MLR1
The basic purposes of the Regulations and our anti-money laundering and counter terrorist financing regime are summarised below:
- To provide a disincentive to crime
- To aid the detection and prosecution of crime
- To protect the integrity of the financial system and reputation of UK business
- To avoid economic and competitive distortions
- To avoid the economic damage of corruption