FAQs: Fit and proper test fee under Money Laundering Regulations 2007

Please note these FAQs relate to the Money Laundering Regulations 2007 that will come into force from 15 December 2007.

Contents

  1. What is the fit and proper test?
  2. Who is tested?
  3. What is tested?
  4. Why is there a fee?
  5. Why is the fee £50?
  6. When will the fee be charged?
  7. Why are there two fees?
  8. Do I get a refund if someone fails the F&P test?
  9. What happens if the fee is not paid?
  10. Where can I find the Money Laundering Regulations 2007?

1. What is the fit and proper test?

The EU Third Money Laundering Directive stipulates that a fit and proper test be applied to those who effectively run, or are beneficial owner, of a money service business or a trust or company service provider. The Directive will be implemented into UK law by the Money Laundering Regulations 2007 when they come into force on 15 December 2007.

  • The fit and proper test will check individuals against a number of objective criteria set out in the new Money Laundering Regulations. The intention is to deny the riskiest individuals access to the Money Service Businesses (MSBs) and Trust or Company Service Providers (TCSPs) sectors. HMRC will perform these checks at registration using an array of internal and external information sources. If any of these criteria are met, HMRC will have to refuse the application.

2. Who is tested?

The fit and proper test will be applied to all money service businesses and trust or company service providers, 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 or
  • 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 and trustees. HMRC will publish detailed guidance on who will be subject to the test in due course.

3. What is tested?

HMRC must be satisfied that the people being tested have the met the requirements set out in the Regulations. In summary, the person must not:

  • have been convicted of certain criminal offences
  • be an undischarged bankrupt
  • be disqualified from acting as a company director
  • be subject to a confiscation order under the Proceeds of Crime Act
  • have a track record of consistent non-compliance with the Money Laundering Regulations or the EU Payments Regulation.

The criteria are listed in full in the Regulations. We will publish more information on how we will conduct the tests later this year.

4. Why is there a fee?

The Money Laundering Regulations supervisory regime is run on a full cost recovery basis. We charge fees to cover the cost of running the operation. The new fee is necessary to cover the additional costs of carrying out fit and proper tests on MSBs and TCSPs.

5. Why is the fee £50?

The fee is set at a level that will enable HMRC to recover the full costs of introducing and operating a fit and proper testing regime. These costs include costs of processing applications, carrying out checks, obtaining further information and other related functions.

6. When will the fee be charged?

The fee is a one-off payment charged at registration.

7. Why are there two fees?

Under Money Laundering Regulations 2007 HMRC will supervise four sectors, all of whom will need to register and pay a registration fee:

  • High Value Dealers
  • Money Service Businesses
  • Trust or Company Service Providers
  • Accountancy Service Providers.

The fit and proper test fee will only apply to those sectors that require a Fit and Proper test, ie:

  • Money Service Businesses
  • Trust or Company Service Providers

The fit and proper test fee covers the full costs of introducing and operating a fit and proper testing regime. These costs include costs of processing applications, carrying out checks, obtaining further information and other related functions. These costs only arise from supervision of TCSPs and MSBs, so the fee is designed only for those sectors.

The registration fee covers all other expenditure on registering firms under the Money Laundering Regulations. This includes the costs of registering new businesses (other than carrying out fit and proper tests), contacting and visiting traders, running an effective risk system, updating and maintaining the register and producing guidance and information for customers. These costs arise across all registered sectors, hence the same registration fee level.

8. Do I get a refund if someone fails the F&P test?

No. The fee covers the work required to carry out checks on applications. Clearly these checks will need to be carried out for all applicants, so regardless of whether the checks result in registration or failure costs will be incurred.

9. What happens if the fee is not paid?

If the fee is not paid, HMRC will be unable to process the application and you will be unable to register your business.

10. Where can I find the Money Laundering Regulations 2007?

You can find the Money Laundering Regulations 2007 on the HM Treasury website.