The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Pay) Regulations 2017 (SI 2017/692) took effect from 26 June 2017 and replace the previous 2007 Regulations with new statutory requirements for systems and procedures. Broadly, the regulations require firms undertaking certain financial activities to apply risk-based customer due diligence measures and take other steps to prevent the firm’s services from being used for money laundering or terrorist financing.
The regulations apply to a number of different business sectors, including financial and credit businesses, accountants and estate agents. Every business covered by the regulations must be supervised by a supervisory authority.
The 2017 Regulations stipulate that firms must appoint a money laundering compliance principal (MLCP) and that individual must be on the board of directors (or equivalent management body), or a member of senior management, where appropriate to the size and nature of the business. Firms must also appoint a nominated officer (i.e. the individual nominated to receive internal suspicious activity reports and who assesses whether a suspicious activity report should be made to the National Crime Agency (NCA)). The MLCP and the nominated officer can be the same person but the identities of each need to be communicated to the supervisory body within 14 days of first appointment.
Firms were required to have a money laundering reporting officer (MLRO) under the 2007 regulations, but they now need to make sure that the equivalent individual under the 2017 Regulations (the MLCP) is on the board of directors (or equivalent management body), or is a member of senior management, and that they have responsibility for compliance with the regulations.
HMRC supervises the following seven business sectors:
- high value dealers;
- trust or company service providers;
- accountancy service providers;
- estate agency businesses;
- money service businesses;
- bill payment service providers;
- telecommunication, digital and IT payment service providers.
Where a business falls into one of these business sectors, it must be registered with HMRC. Failure to comply constitutes a criminal offence.
Further information on the regulations can be found on the gov.uk website. The Institute of Chartered Accountants in England and Wales (ICAEW) has also published an overview of the Money Laundering Regulations 2017, which provides helpful guidance on the changes.