REGISTRATION AND SUPERVISION

 

HMRC are responsible for supervising businesses that are required to register under the Money Laundering Regulations 2007. All businesses covered by the regulations must be supervised by an appropriate anti-money laundering supervisory body. This may be a designated professional body or HMRC. HMRC have warned that those that should have registered with them and have not done so will be charged a penalty.

 

HMRC’s Role

 

The role of HMRC is to investigate the laundering of the proceeds of tax, National Insurance contributions or tax credit fraud. HMRC’s involvement is limited to cases in which tax evasion is a feature.

 

Special Civil Investigations (SCI) is the investigating body for money laundering offences featuring tax evasion, through its dedicated Anti-Money Laundering Unit.

 

Money laundering reports must be sent to the Serious Organised Crime Agency (SOCA) in the first instance. If SOCA is satisfied that there is no wider criminality beyond tax evasion, information from the disclosure report is forwarded to the SCI Intelligence Group.

 

HMRC rely on the integrity of professionals (e.g. accountants and lawyers) who act on behalf of clients. HMRC’s policy is, therefore, to seek to prosecute accountants, tax advisers and other professionals who assist their clients, or who act in their own capacity to evade tax through money laundering activities. Further areas of risk for practitioners include failing to make a report to SOCA as soon as is practicable after a knowledge or suspicion of money laundering arises, and/or tipping off the subject of the report.

 

Code Of Practice 28

 

As part of the supervision process HMRC have recently published a new code of practice (Code of Practice 28), which sets out the ground rules for HMRC visits to businesses that are required to be registered.

 

Code of Practice 28 states that HMRC will be applying a risk-based approach by using information from different sources to help them decide where to focus resources and which businesses to visit. This means they will be using information provided by businesses upon registration, the results of visits and other checks carried out on businesses, sector intelligence and analysis; and industry trends and emerging risks. SOCA will be notified if, in the course of carrying out their supervision duties, HMRC become aware or suspect that a business is or has engaged in or has attempted money laundering or terrorist financing.

 

There are two key requirements under the 2007 regulations. Businesses must comply with the legislation by putting in place risk sensitive anti-money laundering policies and procedures to prevent the business being used by money launderers and terrorists. The second requirement concerns the obligation to report any suspicious activity to SOCA. The purpose of an HMRC visit therefore is to ensure that businesses are complying with the legislation and taking advantage of simplified procedures.

 

In the majority of cases, HMRC will arrange a convenient meeting time and will confirm the information, documents and records that will be needed on the day. In exceptional circumstances HMRC may visit without an appointment. When they arrive they will identify themselves and give the reason for the unannounced visit.

 

The Visit

 

On the day of the visit HMRC will need to talk to the owner of the business, the person within the business responsible for compliance with anti-money laundering legislation and/or the nominated officer/money laundering reporting officer. Broadly, it will be necessary to demonstrate how the business operates the anti-money laundering policies and procedures.

 

The focus of the visit will be on the business’ risk sensitive anti-money laundering policies and procedures to make sure they successfully manage and reduce the money laundering and terrorist financing risks faced by the business. During a visit HMRC will:-

 

    • Check the information held on the HMRC register is correct

 

    • Ensure the right people within the Money Service Businesses and Trust or Company Service Providers have undergone the fit and proper test

 

    • Ask the proprietor to explain how the risk sensitive anti-money laundering policies and procedures work

 

    • Answer any questions relating to legal responsibilities under the anti-money laundering legislation

 

    • Look at the procedures for risk-assessment of the business’ customers, products and services

 

    • Examine the anti-money laundering policies, procedures and training the business has implemented to manage and reduce the risks identified

 

 

 

 

HMRC may also:-

 

    • Examine transaction records and related documents to check that the customer due diligence measures have been adequately applied

 

    • Evaluate systems for identifying and reporting suspicious activity to SOCA

 

    • Check that all staff are aware of the law relating to money laundering and terrorist financing and are sufficiently  trained to recognise and deal with suspicious activity

 

    • Ensure that adequate systems are in place to manage compliance with the Money Laundering Regulations 2007.

 

 

 

 

If the business is a Money Service Business or High Value Dealer, HMRC may also inspect any cash found on the premises.

 

At the end of the visit, HMRC will review what has been done, explain any areas of concern and agree any action that needs to be taken. This will subsequently be confirmed in writing along with an outline of penalties that may be imposed for non-compliance within an agreed time-limit.

 

Records

 

Example of business records the officer is likely to want to see include:-

 

    • Anti-money laundering policies and procedures

 

    • Policy statement showing business’ risk assessment of its customers, products and services

 

    • Internal audits of compliance with internal anti-money laundering procedures and controls

 

    • External auditor’s report where it relates to compliance with anti-money laundering legislation

 

    • Compliance reports in relation to anti-money laundering legislation

 

    • Bank statements relating to relevant business

 

    • Copies of and references to evidence of a customer’s identity and the supporting records of customers due diligence measures and ongoing monitoring

 

    • Staff anti-money laundering training manuals

 

    • Records of all transactions covered by money laundering regulations

 

    • Records/copies of suspicious transactions, action taken, copies of any Suspicious Activity Reports submitted to SOCA and any correspondence from them concerning consent.

 

 

 

 

HMRC will look at Suspicious Activity Reports for anti-money laundering legislation purposes only and not for tax purposes.

 

ID Cards for Foreign Nationals

 

The 2007 regulations require relevant businesses to carry out customer due diligence on their customers and this may involve asking for documentary evidence of a customer’s identity. On 25th November 2008 the UK Border Agency began the roll-out programme of new ID cards for foreign nationals. It is important that all practitioners are aware of the new cards, their significance as documentary evidence of ID, the information they contain and how they can be recognised as genuine documents.

 

The cards will be issued to migrants from countries outside the European Economic Area (EEA) applying for leave to remain in the UK. Initially they will only be issued to migrants in the category of a student or on the basis of marriage or partnership from 25th November 2008 though they will be rolled out to other categories of migrants in the future.

 

Over time, the cards will replace vignettes (stickers) and stamps in passports and will act as stand-alone grants of leave to stay in the UK. The cards can be accepted as a form of identification though there is no requirement that cardholders must carry their ID card on them at all times.

 

Further information of the new ID cards can be obtained from the UK Border Agency card verification helpline on 0300 123 4699.

 

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