Beginner’s guide

Money Laundering Regulations 2007

Introduction

What is money laundering?

Money laundering is exchanging criminally obtained money or other assets for 'clean' money or other assets with no obvious link to their criminal origins. It also covers money, however come by, which is used to fund terrorism.

Why does the UK have money laundering regulations?

The Money Laundering Regulations 2007 implement the EC Third Money Laundering Directive in the UK. Both of these pieces of legislation reflect the recommendations of the international Financial Action Task Force which was set up to tackle money laundering on a worldwide basis.

The Money Laundering Regulations play a crucial role in safeguarding the UK financial system from organised criminals and terrorists.

When did the new Regulations start?

The new regulations came into effect on 15 December 2007 and replaced the 2003 regulations. All relevant businesses must have appropriate anti-money laundering systems in place. You must not wait until your business is registered before you apply anti-money laundering controls to your customers.

Do they affect me?

What businesses are included in the Money Laundering Regulations 2007?

Most UK financial and credit businesses (banks, building societies, money transmitters, bureaux de change, cheque cashers, pawn brokers, savings and investment firms) are covered. In addition the Regulations cover independent legal professionals (when undertaking certain financial and property transactions) accountants, tax advisers, auditors, insolvency practitioners, estate agents, casinos, high value dealers (when taking cash of €15,000 or more) and trust or company service providers.

Who will be monitoring businesses for compliance with the regulations?

There are a number of supervisory authorities listed in the Regulations, including the Financial Services Authority, HM Revenue & Customs (HMRC), OFT (Office of Fair Trading) and a number of professional bodies. Businesses that are supervised by HMRC must apply to be registered.

HMRC is the supervisor for:

  • Money Service Businesses (MSBs) that are not supervised by FSA
  • High Value Dealers (HVDs)
  • Trust or Company Service Providers (TCSPs) that are not supervised by the FSA or a designated professional body (such as the Law Society) listed in appendix 1 of our MLR 9 Registration Notice (PDF 204K)
  • Accountancy Service Providers (ASPs) that are not supervised by a designated professional body (such as the institute of Chartered Accountants of England and Wales or the Institute of Certified Bookkeepers) listed in appendix 1 of our MLR 9 Registration Notice (PDF 204K)

How can I find out if my business must be registered?

We have produced a list of the types of businesses that must register with us. However, if your business is not listed you will still need to check our guidance to see if the regulations apply to you.

What do I have to do?

If your business will be supervised by HMRC you will need to:

  • register with us
  • pay an annual fee based on the number of premises through which you trade
  • report changes during the registration year
  • put anti-money laundering systems in place so that you can prevent money laundering and report any suspicious activity
  • if your business is a TCSP or MSB, any person who runs or owns the business, and any nominated officer or money laundering reporting officer, will need to apply for a new fit and proper test
  • read the guides that we have written to help you

I need to know more about registration

So if I am supervised by HMRC how do I register with you?

If you need to register with us, then please check our registration information.

When do I have to register?

We have provided a registration summary to help you register in time.

Do I have to pay anything and why?

Yes. The MLRs allow us to charge a registration fee, which is payable at the time of your application to register and will be payable annually from your date of registration. The fee is premises-based and you must pay the fee for each business premises through which you conduct your business.

The registration fee for year commencing June 2007 is £95 per premises. The registration fee is reviewed annually and we write to you when you are due to renew.

More information

We recommend you read:

So is there more I need to do?

Some people involved in businesses will have to take a fit and proper test, do I?

The fit and proper test will be applied to all MSBs and TCSPs at the time of registration, in respect of:

  • the applicant
  • a person who effectively directs or will direct the business
  • a beneficial owner of the business
  • any nominated officer of the applicant

In practice, this means all sole proprietors, partners, directors and nominated officers will need to be tested, as will certain shareholders.

What is a fit and proper test?

The fit and proper test will check individuals against a number of objective criteria set out in the Money Laundering Regulations. Our intention is to prevent high risk individuals from directing or controlling MSBs and TCSPs or acting as a Nominated Officer for them. We will perform these checks at registration using internal and external information sources. If anyone meets the high risk criteria they will fail the test and we will refuse the business’s registration application.

Do I have to pay anything?

There is a one off fee for each applicant, payable at the time of registration. The current fee is £50.

More information

For more information about the fit and proper test we recommend you read:

I need to take action!

What are anti-money laundering controls?

Anti-money laundering controls are policies and procedures that you must put in place within your business to prevent it being used for money laundering.

They include assessing the risks of your business being used by criminals to launder money; identifying customers and beneficial owners and verifying their identity; monitoring customers’ business activities and reporting suspicious activity to the Serious Organised Crime Agency (SOCA); retaining records; and ensuring you have appropriate internal management controls.

You must manage and monitor your compliance with the regulations so you will need to ensure your staff are aware of the regulations and trained to carry out the necessary customer due diligence measures.

What do I need to do?

The Regulations specify the circumstances when you must identify and verify the identity of your customers and obtain additional information about the nature and purpose of your business relationship.

The Regulations allow you to apply these measures on a risk-sensitive basis, which means that you can use your judgement to assess the risks of money laundering in your business and to decide the level of enquiry and monitoring that is reasonable for your business activities and customers.

Businesses must keep relevant documents relating to financial transactions, customer identity, risk assessment and management procedures and processes.

Remember to keep your risk assessment and procedures up to date. We may ask for details of your policies and procedures.

We have included information in our guidance to help you set up anti-money laundering controls:

What happens once I have registered?

Will you tell me I am registered?

You will receive a certificate of registration which serves as notification of your MLR registration number and confirms the details we have for your business.

It is important to note that being registered is not an endorsement from HMRC of the business practices of a registered business.

More information

You can find more information about registration and the fit and proper test in:

Will you keep in contact with me?

Will you telephone or write to me?

Once you are registered we may contact you to give you updates on the money laundering regulations or to ask you for information. We may also visit you to look at the effectiveness of your anti-money laundering policies and procedures. We will write to you before your annual renewal is due telling you how to renew.

How can I find out about any changes?

We recommend you regularly check our website for updates, information and details of trade seminars etc.

We hope you have found this beginner’s guide helpful, here are a few links you will find useful: