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Leigh Sagar, Barrister, outlines the scope of the new Regulations in terms of the requirement to register for regulation.

Leigh Sagar

Introduction 

HMRC have issued draft guidance for registration from 15th December 2007, when the Money Laundering Regulations 2007 (MLRs 2007) come into force.  The purpose of the notice, which can be found at http://www.hmrc.gov.uk/mlr/mlr9.pdf, is to help people find out

• if they need to register with HMRC
• when and how to register
• what fees they will need to pay
• what the new fit and proper test is for Money Service Businesses and Trust or Company Service Providers

The notice should be read by

• Money Service Businesses
• High Value Dealers
• Trust or Company Service Providers
• Accountancy Service Providers

HMRC are the supervisory authority for Money Service Businesses (MSBs) and High Value Dealers (HVDs). Under the MLRs 2007, they will also become supervisors for Trust or Company Service Providers (TCSPs) and Accountancy Service Providers (ASPs).  In addition to registering MSBs, HVDs, TCSPs and ASPs, they also have responsibility for ensuring that these businesses are complying with all the requirements of the MLRs 2007, and have appropriate anti money laundering controls in place.

The notice provides an overview of the role of HMRC and describes who should register, when and how they should register, what the registration fees are and the penalties for failure to register.  It describes de-registering and cancellation, and rights of appeal.

A TCSP is defined in the notes as any firm or sole practitioner who by way of business provides any of the following services to third parties:

• forming companies or other legal persons;
• acting, or arranging for another person to act- 

  - as a director or secretary of a company;
  - as a partner of a partnership; or
  - in a similar position in relation to other legal persons;

• 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;
• acting, or arranging for another person to act, as-

- a trustee of an express trust or similar legal arrangement; or 
- a nominee shareholder for another person other than a company listed on a regulated market which is subject to disclosure requirements consistent with Community legislation or equivalent international standards.

Fit & Proper Test

A TCSP will need to apply for the Fit and Proper (f&p) Test.  It will be part of the registration process and undertaken at the time of registration. It will not be subject to an annual renewal process or renewal fee.

Subject to the test will be:

• The registration applicant;
• A person who effectively directs or will direct the business;
• A beneficial owner of the business;
• Any nominated officer.

For the purposes of the MLRs 2007, a person is not a f&p person if they:

• have been convicted of-

- an offence under the Terrorism Act 2000;
- an offence under paragraph 7(2) or (3) of Schedule 3 to the Anti-Terrorism, Crime and Security Act 2001;
- an offence under the Terrorism Act 2006;
- an offence under Part 7 of the Proceeds of Crime Act 2002 (PoCA 2002);
- an offence listed in Schedule 2, 4 or 5 of PoCA 2002;
- an offence under the Fraud Act 2006;
- an offence under section 72(1), (3) or (8) of the Value Added Tax Act 1994;
- cheating the public revenue;

• have been adjudged bankrupt or in respect of whom sequestration of his estate has been awarded and (in either case) has not been discharged;
• are subject to a disqualification order under the Company Directors Disqualification Act 1986(a), or has effectively directed a business which has consistently failed to comply with the requirements of the Act;
• are or have been subject to a confiscation order or recovery order under PoCA 2002;
• have consistently failed to comply with the requirements of the MLRs;
• have consistently failed to comply with the requirements of regulation 2006/1781/EC of the EU Payments Regulation;
• have effectively directed a business which has consistently failed to comply with the requirements of the Money Laundering Regulations and/or the Payments Regulation;
• are otherwise not a fit and proper person with regard to the risk of money laundering or terrorist financing.

Trust and Company Service Providers

Schedule 4 deals with TCSPs.

The following businesses will be covered:

• Businesses, including recruitment agencies, involved in arranging for someone to act as either a permanent or interim director, shadow director or company secretary or partner of a partnership;
• Personal service companies of interim managers acting as either a permanent or interim director, shadow director or company secretary or partner of a partnership;
• Company formation agents;
• Suppliers of accommodation or correspondence addresses and telephone answering services for businesses other than sole proprietors and people acting as professional trustees;
• Will writers and family offices (when not supervised by a professional body or the FSA), when they act or arrange for others to act as professional trustees.

Family Offices

There is discussion about the need for Family Offices to register.  A Family Office is a specialist type of financial advisor providing services to a very wealthy family, or perhaps to a small number of very wealthy families. If the Family Office provides the service of managing and/or advising or safeguarding and administering investments on a professional basis then it will be regulated by the FSA and will not need to register with HMRC. If the Family Office does not provide a service of managing and/or advising on or safeguarding and administering investments but it does act or arrange for others to act as trustees, then it will not be regulated by FSA and will need to register with HMRC.

Trusts

An express trust is defined as

“an arrangement where there is a clear and expressed intention to create a trust. In a trust, ownership is divided between the trustees and the beneficiaries: the trustee is given the legal title to the property which gives them the duty to manage and control the property for the benefit of the beneficiaries who are exclusively entitled to the benefit of the property. A trustee can also be a beneficiary of the trust."

If trusts are set up and trustees appointed by legal professionals, which are already supervised by a body, such as the Law Society, listed in Appendix 2 of the notice, they will not be required to register with HMRC.  A person who arranges for other people to become professional trustees of express trusts, including trusts created in a will, will need to register as a TCSP, unless they are already supervised by a body listed in Appendix 2.

Will writers

A will writer that also offers services as a professional executor or administrator, will not need to register as a TCSP unless he acts (or arranges for another person to act) as a professional trustee in relation to trusts (other than the administrative trusts) created by the will.

A will writer who only drafts wills and does not provide any other services, will not need to register as a TCSP.

Beneficial owner

In the case of a body corporate (other than a company listed on a 'regulated market'), a beneficial owner is any individual who:

• Ultimately owns or controls (whether through direct or indirect ownership or control, including through bearer shareholdings) more than 25% of the shares or voting rights in the body; or
• Otherwise exercises control over the management of the body.

In the case of a partnership, beneficial owner means any individual who:

• Is entitled to or controls more than 25% of the capital or profits of the partnership or more than 25% of the voting rights; or
• Otherwise exercises control over the management of the partnership.

In the case of a trust, beneficial owner means:

• Any individual who is entitled to a specified interest in at least 25% of the capital of the trust property;
• For trusts that are not set up for the benefit of individuals, the class of persons in whose main interest the trust is set up or operates;
• Any individual who has control over the trust.

Appendix 2 - Supervisory Authorities and Professional Bodies named in the MLRs 2007

The Supervisory Authorities are:

• The Financial Services Authority (FSA);
• The Office of Fair Trading (OFT);
• The Commissioners of Her Majesty’s Revenue & Customs (HMRC);
• The Gambling Commission of Great Britain;
• The Department of Enterprise, Trade and Investment in Northern Ireland (DETI); and
• The Secretary of State for the Department for Business, Enterprise and Regulatory Reform.

The Professional Bodies are:

• The Association of Chartered Certified Accountants
• The General Council of the Bar
• The General Council of the Bar of Northern Ireland
• The Council for Licensed Conveyors
• The Faculty of Advocates (Scotland)
• The Institute of Chartered Accountants in England and Wales
• The Institute of Chartered Accountants in Ireland
• The Institute of Chartered Accountants of Scotland
• The Law Society
• The Law Society of Scotland
• The Law Society of Northern Ireland
• The Association of Accounting Technicians
• The Association of International Accountants
• The Association of Taxation Technicians
• The Chartered Institute of Management Accountants
• The Chartered Institute of Public Finance and Accountancy
• The Chartered Institute of Taxation
• The Faculty Office of the Archbishop of Canterbury
• The Insolvency Practitioners Association
• The International Association of Book Keepers
• The Institute of Financial Accountants
• The Institute of Certified Book Keepers

The above article is taken from 'Life and Death and Taxes' (http://ladat.co.uk/) and is reproduced with the kind permission of Leigh Sagar, who retains the copyright.