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HMRC internal manual

Money Laundering Regulations: Compliance

Appendix 6 Agents and Principals: Registration requirements of Agents and Principals

Our view of the registration requirements as they apply to Money Service Businesses in an Agent/Principal relationship was confirmed in the Tribunal decision in the case of Moneygram Payment Services Inc v Commissioners of HMRC.

In essence we do not accept the idea of “arms length” agents. Registration depends on the contractual arrangements between the customer, the “agent” and the “principal”.

This means that where a principal provides services to customers through an agent, the principal must apply to register all the agent’s premises and pay a fee for each one. If the agent only provides services on behalf of a principal there is no need for the agent to register separately. If however, an agent that is included in the registration of its principal also conducts business that is not carried out on behalf of the principal, it is necessary for the agent to register for the separate MSB services that it provides.

Generally therefore where a business arranges to supply its services to the public via another business an agent/principal arrangement will be in place. The principal must register and include in its list of premises any agents premises that they supply their services through. To determine which business should be registered it is necessary to establish which business is providing the service to the public. This will be determined by the terms of the contract between the two businesses. If there is no written contract or agreement between the parties it is unlikely that there is an agent/principal arrangement. Asking the following questions will help in establishing what the correct situation is.

* Do you have a written contract with another business to supply services on their behalf?
* Who determines the charges and if appropriate any currency exchange rates?
* Who does the customer enter into a contract with?
* What are the responsibilities under the contract of both parties?
* If a computer system is used to maintain records which business supplies it and is responsible for its ongoing maintenance and development?
* What name appears on documents such as order forms, receipts, contracts that are used and issued to customers?