The Information about People with Significant Control (Amendment) Regulations 2017 (PSC 2017) also came into force on 26 June2017.

Transcription

1 Overview of Changes Introduced by The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 which came into force on the 26 th of June 2017 (MLR 2017). The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 were published by the government on 22 June 2017 and came into force on the 26 June 2017 (MLR 2017). These regulations replace the Money Laundering Regulations The Information about People with Significant Control (Amendment) Regulations 2017 (PSC 2017) also came into force on 26 June2017. Given the extremely short lead-in time to implement the new requirements, this document provides a summary of the keys changes affecting individuals and businesses that fall into the scope of MLR This document should be read in conjunction with the Money Laundering Regulations. The guidance below is based on an initial review of the new Regulations. The Consultative Committee of Accountancy Bodies (CCAB), which writes the Treasury approved anti-money laundering guidance for the accountancy sector, is being updated. In addition, further comment and guidance will be issued from professional bodies. Scope The MLR 2017 apply to firms and individuals who, in the course of business, act in the following capacity: R 8(2) Auditors Insolvency Practitioners External Accountants Tax Advisers Trust or Company Service Providers Within this summary firm is to be taken to refer to a sole-practitioner, partnership or legal entity. Further information is available in Regulations 8 to 15. CDD - Business Relationship Clarity is given that if the Firm is asked to form a company then this is a business relationship and consequently requires the Firm to undertake Customer Due Diligence (CDD). Further information is available in regulation 4(2) MLR Beneficial Ownership The idea of an individual who otherwise exercises control over the management of a body corporate (other through shares or voting) has been replaced with an individual who exercises ultimate control over the management of the body corporate. 1

2 An individual who controls a body corporate now refers to the People of Significant Control (PSC) tests. The guidance at Companies House on the PSC requirements for companies and limited liability partnerships has been updated. Scottish Partnership are specifically referred to being included. More detailed information on beneficial owners of trusts is included in regulations Carrying on business in the UK is explained to tie in with the application of the regulations accordingly. Risk Assessments R.18, Each Firm must conduct, assess and document the money laundering risks faced by the firm as a whole, not just their clients. The factors to be taken into account relate to: customers; geography; products and services; transactions; and delivery channels Further information on the risk factors is included in Regulation 18 of the MLR The appropriate steps to take to create such a risk assessment, vary on the size and nature of the Firm. An up-to-date documented copy of the Firm s risk assessment must be kept. Policies and Procedures A Firm must have policies, procedures and controls in place to mitigate and manage the money laundering risks identified in the Firm s risk assessment. Such policies, procedures and controls should be proportionate to the size and nature of the Firm. With regard to the size and nature of the Firm, (this specifically excludes a sole-practitioner, though please check the definition) the Firm may need to appoint an officer responsible for compliance with MLR 2017, carry out employee screening and establish an independent audit function. The Firm will also need to appoint a Nominated Officer or Money Laundering Reporting Officer. The appointment of the officer is responsible for compliance and the nominated officer must be reported to the Firm s AML supervisor within 14 days of their appointment. The Firm must screen employees who are either joining or who are already employed. This, in summary, relates to their skills, knowledge, expertise, conduct and integrity. This relates to relevant employees, which is fairly broadly defined. Additional guidance on an Independent Audit Function is awaited. Further information is available in Regulations

3 Training The requirement to train employees is reiterated. The explanation of which employees should be trained is now clearer. Specific reference is made to the need to communicate the Firm s policies, procedures and controls and any updates to these made to employees. It is a requirement to document all training for staff and communication of policies, controls and procedures to staff along with their data protection responsibilities. Further information is available in Regulation 24. Ownership and Management Restrictions (of the Firm) By 26 June 2018 a Firm must apply to its AML supervisor for approval of its beneficial owners, officers and managers, as defined in MLR The Firm s AML supervisor must grant that application unless the applicant has been convicted of a relevant offence. Any subsequent conviction must be notified to the Firm s AML supervisors within 30 days. A breach of this is a criminal offence. A relevant offence is listed in Schedule 3 of MLR Further information is available in regulation 26. Customer Due Diligence (CDD), Simplified Due Diligence (SDD) and Enhanced Due Diligence (EDD) Greater explanation has been provided of when to undertake CDD and what is expected of a Firm. The prescriptive lists of when to conduct simplified has been removed and replaced by a risk-based approach towards due diligence. The requirements of CDD and EDD, though more clear, are wider ranging and extend to those who purport to act on behalf of the client. What is important to understand is that CDD is not only identifying and verifying a client but includes an ongoing commitment to monitor the nature and activities of a client and to link this to the risk assessments undertaken by the Firm both on itself and its client. Further information on general customer due diligence is available in regulations SDD can be applied when the client is low risk. Factors to be taken into account when assessing whether there is a low degree of money laundering risk are included in Regulation 37. Enhanced Due Diligence (EDD) should be applied where there is a higher risk of money laundering or terrorist financing. More detail on the factors to consider and how to undertake Enhanced Due Diligence in Regulation 33. There are several limited exceptions when a business relationship could continue without CDD being undertaken at that stage. 3

4 Politically Exposed Persons (PEP) Though the definition of a PEP remains largely unchanged, a UK PEP now falls under the requirement to undertake Enhanced Due Diligence (EDD) and to get senior management approval. A PEP is an individual who is entrusted with prominent public functions, other than as a middle-ranking or more junior official. This includes members of Parliament. Firms must have a process in place to identify PEPs or a family member or close associate of a PEP as Enhanced Due Diligence procedures and senior management approval are then required. Further details regarding PEPs can be found in Regulation 35. Additional guidance on how to deal with PEP clients will be issued by the Financial Conduct Authority (FCA). Third Party Reliance There is greater clarity on how to conduct the process of reliance on a third-party for CCD purposes, however, the Firm is still liable for any failing in CDD NOT the third-party. Further detail is available on regulation 39. Record Keeping and Data Protection The requirement to hold the firms records for five years after the business relationship is ended or the occasional transaction is completed continues. There is a requirement to delete personal data after that five year period, other than in a limited number of circumstances. Further information is available in regulations Beneficial Ownership Information The obligation exists for corporate bodies and certain trusts (both as defined in the regulations) to update the Firm with 14 days of changes to its information as detailed. There is requirement for HMRC to establish a register for information on certain trusts, the first deadline for registering is 31 January Further information is available in regulations

5 AML Supervisors More guidance is included for AML supervisors on how to go about their role. There is also an obligation on them to provide both risk based guidance for the sector and to update Firms as new risks are identified. There is more guidance also on how a supervisor should structure itself internally. Effective, proportionate and dissuasive is the description given to the disciplinary measures that supervisors should render. Sanction powers of HMRC are set out in detail. Further information is available in regulations 46 to 52. Register of Trust or Company Service Providers (TCSP) HMRC must establish a register of TCSPs who are not registered with Financial Conduct Authority (FCA). This will cover all non-fca registered firms but is not a replacement for AML supervision. A fit and proper test will be applied to applications to be registered. HMRC may establish a register to cover those firms within the accountancy sector that are subject to MLR A firm must not act as a TCSP unless it is on the register or has applied and not been rejected from registration. We await information from HMRC on the establishment of the TCSP register. Further information is available in regulations 53 to 60. 5