EU Payments Regulation 2007 and The Transfer of Funds Regulations

Glossary of terms

Abbreviation

Meaning

PSP

Payment Service Provider

IPSP

Intermediary Payment Service Provider

MLRs

Money Laundering Regulations

The Payments Regulation

Regulation EC No 1781/2006 on information on the payer accompanying transfers of funds

The Transfers of Funds Regulation

The Transfers of Funds (Information on the Payer) Regulations 2007

CIP

Complete Information on the Payer

f&p

Fit and proper test (under the MLRs)

SOCA

Serious Organised Crime Agency

Background

The Payments Regulation came into effect on 1 January 2007 for anyone carrying out business within the EU as a PSP.

In the Payments Regulation, a PSP is defined as a natural or legal person whose business includes the provision of transfer of funds services.

This applies to many different types of business, but for our purposes if you are a money transmitter you are a PSP.

What does the Regulation require?

The Regulation applies to all transfers of funds in any currency which you as a money transmitter send or receive. It sets out specific obligations which are additional to your obligations under the MLRs.

These obligations are that you must:

1. Obtain CIP

For all transactions that you send and/or receive you need to make sure that you have CIP. This consists of:

  • the payers name
  • the Payers address, or date and place of birth, or customer identification number, or national ID number
  • an account number, or a unique identifier which enables the transaction to be traced back to the payer

2. Verify CIP

For all transactions over 1,000 euros (that are not made from an account) you must verify the information on the basis of documents, data or information obtained from a reliable and independent source.

You will also need to verify CIP for several transactions which appear to be linked and together exceed 1,000 euros.

We would recommend as an additional measure that you may wish to verify your customers CIP for all first time or one off transactions

3. Ensure that CIP is kept with the transfer

  • If you are acting as PSP of the Payer

    For all your transfers of funds, you need to make sure that you send the CIP so that it reaches the PSP who will pay out the money to the intended recipient or Payee.

    If the PSP of the Payee is within the EU, you only need to send either the account number or unique identifier which is acceptable as CIP.

  • If you are acting as PSP of the Payee

    If you are the PSP of the Payee, you need to make sure that you receive CIP from the PSP of the Payer. If you do not receive the information, you should ask for it, or consider rejecting the transfer.

    • If you deal with a PSP on a regular basis and they consistently fail to send CIP you may consider taking steps which may involve issuing warnings or setting deadlines to ensure that you receive CIP, before deciding whether to restrict or end your business relationship with the PSP.

    You must also consider missing or incomplete CIP as a factor in assessing whether the transfer of funds is suspicious and needs to be reported to SOCA.

4. Keep records

You need to make sure that you keep all your records of CIP for five years.

Obligations on IPSPs

You are an IPSP if you are involved in the transfer of funds but are not the PSP of either the Payer or the Payee. You need to make sure that all the information you receive that accompanies a transfer is kept with the transfer.

The Transfer of Funds Regulations

Penalties for not complying

Because of the obligations set out in the Payments Regulation, The Transfer of Funds Regulations came into effect in the UK on 15 December 2007 which gives HM Revenue & Customs (HMRC) powers to supervise money transmitters in respect of the Payments Regulation and powers to impose penalties on businesses not complying.

As with penalties we may issue under the MLRs, they must be of an 'appropriate' amount which means effective, proportionate and dissuasive.

When we come to visit your business premises to check whether you are complying with the MLRs, we will also be checking to make sure you are complying with the Payments Regulation.

It is useful to be aware that by complying with the Payments Regulation, this will help you to meet some of your obligations under the MLRs.

Does the Payments Regulation link in with the MLRs?

Under the MLRs certain individuals within the business must be subject to a f&p before a business can be registered as a Money Service Business. Although the f&p is a one off test, if an individuals circumstances change to the extent that they no longer meet the f&p criteria, they will no longer be a fit and proper individual and HMRC must cancel the businesses registration. One of the criteria for being considered to be a fit and proper individual is that you have never consistently failed to comply with or effectively directed a business that failed to comply with the requirements of the Payments Regulation. This means that if you are consistently found not complying with the requirements of the Payments Regulation, we may cancel your MLR registration on the grounds of you not being a fit and proper person.

More information about the f&p test can be found in Public notice MLR9.

Where can I find out more?

More detailed information about your responsibilities under the Payments Regulation and under the MLRs can be found in Public notice MLR8.

You can view the Payments Regulation on the Europa website.

You can view the UK Statutory Instrument The Transfer of Funds (Information on the Payer) Regulation 2007 on the HM Treasury website.

If you would like further information or have any queries you can contact the National Advice Service on Tel 0845 010 9000.

You can also send an email to Enquiries.estn@hmrc.gsi.gov.uk.

Or you can send a written enquiry to:

HMRC
National Advice Service
Written Enquiries Section
Southend on Sea
Alexander House
Victoria Avenue
Southend
Essex
SS99 1BD