Money Laundering Regulations
The Anti-Money Laundering Regulations 2017 is the latest EU Directive on Anti-Money Laundering, it supersedes the Money-Laundering Regulations 2007 and the EU’s Third Anti-Money Laundering Directive. Approved by parliament on the 26th of June 2017, it’s at the forefront of anti-money laundering in western Europe. It puts greater emphasis on the offences of aiding and abetting terrorist institutions through financial aid, focusing specifically on money laundering in business or personal relationships. There is also reference to online payments through any electronic means, essentially modernizing the offence, plugging the gaps that have transpired from the 2007 regulations and ensuring full and clear application.
Business wise, sole practitioners or businesses have a raised threshold of when to consult anti-money laundering regulations. A turnover of £100,000 or less per annum puts the person or business outside the scope of the MLD, this is a significant increase from the original £64,000 under the 2007 regulation. However, rules regarding the sale of property are more stringent and more emphasis is put on due diligence of both buyers and seller’s when selling land to ensure that there is no money laundering involved.
The most modern introduction is a strict ‘hard-line’ approach to gambling institutions in the United Kingdom. Previously only registered Casino’s in the UK who create high turnover are implemented in the regulations. Now however, all gambling institutions must adhere to the same rules and regulations to ensure absolute transparency should HMRC request it.
How does it apply to us?
Greater importance is placed onto obligations of certain parties to carry out due diligence of transactions and trusts. A ‘risk-based’ approach is required, essentially dictating that the higher the risk of money-laundering the higher duty of care we owe to doing due diligence to discharge liability. Section 18 of the Regulations state that the regulations contain a non-exhaustive list of what a relevant person may research before carrying out transactions; included on this list are the country of current residence of the buyer/beneficiary and their identity, delivery routes, and products. However, standard practice in our profession is photo ID, date of birth, and confirmation of address and this will continue to be the case as per the regulations. The relevant person must ensure that they’ve done due diligence to a reasonable level. The person, business or relevant persons must adopt a ‘case-by-case’ approach when assessing Customer Due Diligence (CDD). There can be no sweeping exemptions or groupings, all cases must be assessed on an individual basis as to their risk of being exposed or involved in money laundering.
This is important for businesses whom operate in the trust and will-writing field. There must be due diligence carried out on all beneficiaries of a trust, trustee’s and anyone noted in the expression of wishes.
Key Points to note regarding trusts:
From January 2018, HMRC will keep a register of all tax generating express trusts in the UK.
‘tax gathering trusts’
This applies to:
- Capital Gains Tax
- Income Tax
- Stamp Duty Tax
- Any other trust that generates tax of any kind.
Under S.44, all trustees must keep up to date records of all beneficial owners or anyone with control over the trust. This must include the most current address and identification of the individual(s). It is the trustee’s responsibility to ensure the trust register is kept up to date and documents available to HMRC or Regulatory Authority if requested. There must be absolute transparency with all parties of a trust, should HMRC request any information of any trust all documentation must be logged and in writing.
The crucial part that of this is that members, will-writers or any relevant person no longer need to complete the 41G form when this statute takes effect. HMRC will not be accepting them as it will all be through an online register.
Overall, this means that there is a further administrative burden placed upon the trustees and beneficiaries of a trust, who may have to supply further information to prove their identity. There is also a duty to keep all written documentation available for five years from the conclusion of transaction or trust in case any government authority requests the information. Section 21(1)(b) of the Regulations require that in large firms the ‘relevant employees’ be screened for risk of money laundering, especially those who have regular contact with customers and clients. These employees must familiarize themselves with the 2017 Regulations and know of the risk and subsequent civil liability or criminal liability associated with a breach of these rules. This also extends to sole practitioners.