There are two sets of guidance, each running to over 50 pages. One is aimed at high value dealers, defined in the regulations as a firm or sole practitioner making or accepting cash payments of €10,000 or more, or its equivalent in another currency in exchange for goods, including when this payment is made into their bank account or to a third party for their benefit.

High value dealers are trading in cross border deals covering anything from alcohol to jewellery and cars. Several features of the high value dealer sector make it attractive to criminals, such as the anonymity of cash, the one off nature of many transactions and the ease of carrying high value goods across borders.

There are a number of ways to assess a client’s risk profile. A high value dealer that buys bulk, low value goods presents a different risk profile to a high value dealer that sells high-end luxury cars. However, both may be targeted by criminals if they have little or no controls in place.

Cash is a key component in organised criminal activity and criminals may try to dispose of cash through the purchase of goods. Because of this, high value dealers must be vigilant to high risk areas.

The guidance states that the rules do not include payment made for services. Where a payment is made for goods and services, such as fitting a bathroom, the transaction is only in scope if the goods are valued at more than €10,000 or the equivalent in another currency.

The other guidance is for trust or company service providers. HMRC says that while they may not routinely deal directly with a customer’s funds, they will be able to focus on the persons they are transacting with and the nature of the services provided.

HMRC says trusts and other corporate structures can be misused by criminals for illegal purposes such as hiding the ultimate beneficial ownership of assets, use of virtual offices, mail forwarding or serviced offices to add a layer of anonymity, and legitimating the integration of the proceeds of crime or layering of crime proceeds through various forms of investment such as in the stock market.

The guidance suggests there are a range of factors which should alert accountants and others to the possibility that a corporate structure is being used for money laundering. They include the use of multiple companies or trusts which adds a layer of complexity to ownership; fees are not in line with the level of services provided; customers or professionals being evasive or reluctant to provide required CDD information or documentation or where ownership is said to be confidential.

Other factors include intermediary chains where trust or company service providers act as nominee director for large numbers of limited companies; use of off-shore bank accounts without legitimate economic requirement and where sources and/or destinations of funds are unknown; and large movement of funds through a company with no good legal or commercial reason or an absence of any underlying transactions.

Both sets of guidance cover the responsibilities of senior managers, risk assessment, policies, controls and procedures; customer due diligence; reporting suspicious activity; record keeping; staff awareness; and the specific risks associated with their sector of operations. 

There is detailed advice on the treatment of politically exposed persons (PEPs) and on the responsibilities of the senior manager and compliance offer.

HMRC says it would not expect a sole trader carrying out regulated activity from one premises, with no more than two or three staff and running an uncomplicated business model or organisation to appoint a compliance officer. However, businesses with more premises, that use branches or agents, have a high turnover of customers, carry out non-local or cross border trading or have complex ways to deliver services will need a compliance officer.

It is possible to risk assess a customer to establish that they are low risk, but businesses are still required to identify and verify customers’ identity and identify, and take reasonable measures to verify, beneficial owners’ identity. Under simplified due diligence however, they can change when it is done, how much they do, or the type of measures they take to identify and verify a person.

The guidance signposts businesses and others to additional sources of information. Businesses that provide both accountancy services (ASP) and trust or company services and are supervised by HMRC should follow the Consultative Committee of Accountancy Bodies (CCAB) guidance for ASP activities, and refer also to this guidance for trust or company service provider activities.

Money laundering supervision: guidance for high value dealers is here.

Money laundering supervision: guidance for trust or company service providers is here.

Report by Pat Sweet