Under the Money Laundering Regulations 2007 (the Regulations) some trustees of pension schemes or directors of a corporate trustees are required to register with HMRC by 1 April 2008. This requirement applies to trustees who provide their service ‘by way of business’ and are not already registered with another supervisory authority or prescribed body.
Under the Regulations trustees may also be required to put in place certain anti-money laundering systems.
Trustees that are required to register and fail to apply to register by 1 April 2008 will not be permitted to carry on providing their service.
Failure to comply with the new anti-money laundering requirements may also lead to a civil or criminal penalty. There is no upper limit to the civil penalty and conviction under the Regulations can lead to 2 years’ imprisonment and/or unlimited fine.
Below is brief summary of the Regulations:
Registration with HMRC
Individual trustees, trustee firms and directors of trustee company may be required to register with HMRC if they are deemed to be a ‘trust or company services provider’ (TCSP). Trustees will be a TCSP if they provide their service as a trustee ‘by way of business’.
In the absence of specific HMRC guidance it is not clear which trustees are deemed to be providing a service by way of business and therefore need to register with HMRC. Nevertheless it is thought that trustees/directors that promote themselves as professional trustees are required to register. Unpaid trustees on the other hand are thought to be unlikely to be caught by this registration requirement.
It is unclear whether trustees that receive some payment for their service as trustees (eg trustees who receive a standard fee set by the board) are seen as providing their service by way of business and need to register.
For trustees who are not sure as to whether they fall under the definition of TCSP HMRC recommends that trustees write to obtain specific guidance from HMRC’s Money Laundering Regulations registration unit at the address below:
National Advice Service
Written Enquiries Section
Southend on Sea
Telephone: 0845 010 9000
Trustees that are already supervised by another authority/body
If a trustee is a TCSP because they provide their service by way of business but the trustee is already supervised by one of the supervisory authorities or professional bodies listed in Appendix 2 of HMRC guidance MLR9, then the trustee does not need to register with HMRC.
If the trustee is supervised by the FSA it will not need to register with HMRC as the FSA is a listed supervisory authority in appendix 2 of MLR9. However note that the trustee must notify the FSA that it is a TCSP.
How to register?
A trustee that is a TCSP and not supervised by another prescribed authority or body (see above) is required to apply to register with HMRC by 1 April 2008.
To register with HMRC complete form MLR100, MLR100 continuation sheet and pay an annual registration fee of £95 (fee for year commencing June 2007) which is payable for each business premise used to conduct the business. See HMRC guidance on completing this form.
As part of the registration process TCSP are also required to apply to pass a 'fit and proper test'. This can be done by completing MLR101. A one off fee of £50 for each applicant is also required. See HMRC guidance on completing this form.
Further obligation to monitor
The Regulations also impose monitoring obligations on a TCSP to ensure the scheme is not being used for money laundering. These requirements apply to all TCSPs including those that do not need to register with HMRC.
In the context of pension schemes a TCSP will often able to carry out a simplified customer due diligence procedure. Under this simplified procedure the TCSP will only be required to carry out customer due diligence when it ‘suspects money laundering or terrorist financing’ and are not obliged to carry out due diligence in other prescribed circumstances such as when establishing a business relationship.
This customer due diligence can also be carried out in risk-based approach that allows the TCSP to balance the costs to the business and its customers with a realistic assessment of the risk of the business being used for money laundering or terrorist financing . Under this risk based approach it is for the TCSP to decide how to carry out the risk assessment with reference to the complexity or simplicity of the business.
In addition to this due diligence requirement the Regulations require the TCSP to establish and maintain appropriate and risk-sensitive policies and procedures relating to:
- ongoing monitoring;
- internal control;
- risk assessment and management; and
the monitoring and management of compliance with, and the internal communication of, such policies and procedures; in order to prevent activities related to money laundering and terrorist financing.
See HMRC guidance MLR8 for further information