A quick reminder of the previous position

We reported on the new money laundering requirements back in April 2008.

Money laundering is the process whereby criminally obtained money or assets (criminal property) are converted or exchanged for "clean money" or other assets with no obvious link to its original origins. The Money Laundering Regulations require certain service providers to have systems in place to prevent money laundering as well as to report suspicious transactions. Failure to comply with these regulations carries civil and criminal sanctions.

New regulations provide that "a firm or sole practitioner who by way of business" provides trustee or company services must comply with the new requirements and register with Her Majesty's Revenue and Customs (HMRC). There was, however, uncertainty over a number or issues, including whether or not paid trustees, though not necessary professional trustees, were required to register.

HMRC originally set a deadline of 1 April for appropriate trustees to register, but was inundated with queries from individuals seeking clarification on whether or not the new requirements applied to their circumstances. It therefore extended the deadline so that it could publish further guidance.

What does the new guidance say?

The new guidance published on 31 July 2008 brings welcome and much-needed clarification on the definition a Trust or Company Service Provider (TCSP) and who, therefore is under an obligation to register.

The guidance states that a TCSP is any firm or sole practitioner who by way of business provides certain services to third parties, including acting or arranging for another person to act as:

  • a director or secretary of a company; or
  • a trustee of an express trust or similar legal arrangement.

This would capture any individual or firm arranging for another person to act, or acting themselves as a director, company secretary or professional trustee.

The new guidance clarifies that sole practitioners and firms who only provide professional trustee services to certain low risk trusts will not be classified as TCSPs. They will not therefore be required to register.

The exemption is limited to the following low-risk trusts:

  • Occupational pension schemes and employee share schemes
  • Straightforward express testamentary trusts such as those creating life interests for spouses or partners, trusts for persons under 25, dependents or persons under a disability or those that make provision for a charity
  • Express lifetime trusts created to manage the affairs of a person under a disability

The exemption also applies to directors of corporate trustees where the trustee company only acts as trustee of "low risk trusts" as defined above.