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HMRC internal manual

Money Laundering Regulations: Compliance

HM Revenue & Customs
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Legislation: Changes affecting our compliance activity

There are several changes which specifically affect penalties and these are covered in detail in our penalties guidance MLR1

The main changes which will affect the way we undertake our compliance activities and are effective from 15 December 2007 are:

  • The need for businesses to adopt an appropriate and a risk-sensitive approach to all aspects of their anti-money laundering policy
  • The requirement for businesses to identify the ‘beneficial owner’ of funds, goods or services - i.e. who stands to gain
  • The requirement for ongoing monitoring of all business relationships with customers
  • The requirement for businesses to comply with directions issued by HMT where the Financial Action Task Force applies counter-measures
  • The requirement for business owners, nominated officers and people who control or direct relevant business carried out by MSBs and TCSPs to pass the fit and proper test
  • The introduction of simplified due diligence for certain products, services and transactions and enhanced due diligence when the customer is not physically present, where the customer is or has been a ‘Politically Exposed Person’ (PEP) and in other situations where there is a risk of money laundering

The example below demonstrates why it is important to carry out enhanced due diligence and enhanced on going monitoring of any businesses relationship with a PEP.

PEP Case Study: A senior government official launders embezzled funds via members of his family.

The family of a former Country A senior government official, who had held various political and administrative positions, set up a foundation in Country B, a fiscally attractive financial centre, with his son as the primary beneficiary. This foundation had an account in Country C from which a transfer of approximately USD 1.5 million was made to the spouse’s joint account opened two months previously in a banking establishment in neighbouring Country D. This movement formed legitimate grounds for this banking establishment to report a suspicion to the national FIU. The investigations conducted on the basis of the suspicious transaction report found a mention on this same account of two previous international transfers of substantial sums from the official’s wife’s bank accounts held in their country of origin (A), and the fact that the wife held accounts in other national banking establishments also provisioned by international transfers followed by withdrawals. The absence of any apparent economic justification for the banking transactions conducted and information obtained on the initiation of legal proceedings against the senior government official in his country for embezzlement of public funds led to the presumption, in this particular case, of a system being set up to launder the proceeds of this crime. The official concerned was subsequently stopped for questioning and placed in police custody just as he was preparing to close his bank account.

These are only a summary of the changes which Compliance Officers need to take into account when checking a business’s compliance with anti money laundering legislation.

Full details of the requirements for businesses can be found in our MLR8 Notice for MSBs and TCSP and the Consultative Committee of Accountancy Bodies (CCAB) guidance for ASPs which can be accessed via the MLR website