Non-executive Directors – Do you need to register?

In an attempt to help with the confusion surrounding who needs to register under the Money Laundering Regulations 2007, HMRC published revised guidance on 31 July 2008 in relation to Trust and Company Service Providers (“TCSPs”). This guidance may have implications for individuals offering their services as non-executive directors to companies, that are deemed by HMRC to be carrying out business in ‘high risk jurisdictions’. It is important that these individuals establish whether or not they fall within the definition within the Regulations and guidance, as if they do they must register with HMRC by 30 September 2008.

Trust or Company Service Providers

The Regulations state that a TCSP is any firm or sole practitioner who by way of business provides any of the following services to third parties:

a. forming companies or other legal persons;

b. acting, or arranging for another person to act –

(i) as a director or secretary of a company;

(ii) as a partner of a partnership;

(iii) in a similar position in relation to other legal persons;

c. providing a registered office, business address, correspondence or administrative address or other related services for a company, partnership or any other legal person or arrangement;

d. acting, or arranging for another person to act, as –

(i) a trustee of an express trust or similar legal arrangement; or

(ii) a nominee shareholder for another person other than a company listed on a regulated market, when providing such services. (emphasis added)

Revised Guidance on TCSPs

Concern over the wide definition of TCSPs in the Regulations led to the issue of the revised guidance, which states that an individual providing their services as company director to a firm will only need to register when that firm is carrying out business in:

a) a high risk jurisdiction

b) a high risk sector

High Risk Jurisdiction

These are jurisdictions which are noted by the Financial Action Taskforce (FATF) as having weak anti-money laundering systems and currently include:

  • Uzbekistan,
  • Iran,
  • Pakistan,
  • Turkmenistan,
  • São Tomé and Príncipe; and the
  • northern part of Cyprus.

A company should be considered to be ‘carrying out business’ in a high risk jurisdiction where it has direct dealings and/or operations in one of these countries. In effect, if a company carries out transactions in a high risk jurisdiction this will constitute ‘carrying out business’.

High Risk Sector

This includes

  • a firm carrying out frequent cash transactions of €15,000 or more,
  • a company operating within the UK but incorporated outside the UK in a non equivalent jurisdiction; or
  • a company with a holding interest in their capital held in the form of unregistered bearer shares.

How to Register

Individuals in business as TCSPs before 15th December 2007 must apply to register with HMRC by 30th September 2008. TCSPs who do not apply by this date may be subject to a civil penalty if they continue to carry on a relevant activity.

Individuals who are setting up in business as a new TCSP should register with HMRC before carrying on that business.

In order to register, individuals and firms will need to send HMRC the completed MLR 100 registration form and appropriate fee.

Detailed guidance on the above from the HMRC can be found on www.hmrc.gov.uk/mlr/guides.htm