If you're registering with HM Revenue & Customs (HMRC) under Money Laundering Regulations and your business is either a Money Service Business or a Trust or Company Service Provider, you'll have to apply for a 'fit and proper' test as part of the registration process.
The fit and proper test is a check to make sure that you and certain other people involved in running the business meet the requirements of the Money Laundering Regulations.
This guide explains what the fit and proper test is and who has to apply for it. It tells you how to apply for the test and what happens if anyone fails it. It also explains what to do when there are changes to the personnel of your business.
On this page:
The aim of the fit and proper test is to prevent unsuitable people from running a Money Service Business or a Trust or Company Service Provider. HMRC carries out these tests as part of the registration process.
HMRC uses information that they already hold and information from other sources to carry out the checks. If any of the applicants fails to pass the fit and proper test, HMRC will not register the business.
There's no need to apply for a fit and proper test every year. But if a new person joins a registered business they will have to take a fit and proper test if it applies to them.
When you register your Money Service Business or Trust or Company Service Provider under the Money Laundering Regulations, you and anyone who controls the business must apply for a fit and proper test as part of the application process.
The regulations say that you must apply for a test if you are:
In practice, this means that you'll have to apply for a fit and proper test if you're:
Some trustees have to apply for a test, as do shareholders who own or control more than 25 per cent of the shares or voting rights in the company.
You're a shareholder in a company which operates as a Money Service Business. There are two other shareholders and you each own an equal number of shares. You apply to register the company under the Money Laundering Regulations. All three of you will have to apply for a fit and proper test because you each own more than 25 per cent of the shares in the company.
If you're a director as well as a shareholder, you'll have to apply for a test even if you own less than 25 per cent of the shares. This also applies to any other shareholder who is a director.
It will normally be obvious whether or not you effectively direct a business. If you are directing the business you will be able to do all or some of the following:
Sometimes it is difficult to be clear whether or not you are directing a business. If you do any of the activities listed in this section and are still not sure you can email HMRC for advice by following the link below.
Form MLR101 is designed to be downloaded, saved on your computer and filled in on screen. When you have finished you need to print the form, sign and date it and send it to HMRC to apply for a fit and proper test.
If you are a non-UK resident you will also need to send documents which confirm your identity and home address.
HMRC will accept documents issued by government to confirm identity, for example a valid passport or valid driving licence which may also confirm your address.
If the identity document does not show your current home address you will also need to send another document to confirm your home address, for example:
You can send original documents or 'certified' copies. An independent professional person can certify a copy for you but they must not be a friend or relative. A family doctor, accountant, civil servant, teacher, solicitor, notary, post office branch employee or employer would be suitable.
They need to write on the copy document(s) that the person named in the document is the person they claim to be. The person certifying the document must also give their name and business contact details.
In some situations where HMRC receive an MLR 101 for a UK resident but cannot confirm the identity they will contact you to ask you to send documents to confirm your identity and home address.
You and anyone else in your business who is applying for a test must send their completed form to HMRC with a one-off fee. The fee is currently £50 for each applicant. Also include form MLR100 Application for Registration if you're applying to register the business under the Money Laundering Regulations. Follow the link below for details of where to send your application.
Once HMRC has received your application for a test they'll carry out various checks to make sure the information you've provided is correct. They'll check your information against their own records and against records kept by other regulatory authorities, government and law enforcement agencies, and commercial organisations.
If they want you to answer questions about your application, HMRC might ask you to visit one of their offices. They'll write to you to tell you where to go, and give you a date for the visit.
The fit and proper test is part of the registration process and HMRC will tell you within 45 days of receiving your application whether they will register your business or refuse to register it. If they ask for any extra information, the deadline for giving you their decision will be extended.
If you pass the test, HMRC will continue to monitor your fit and proper status in case your circumstances change and you no longer meet the requirements of the Money Laundering Regulations.
You will fail the test if you cannot satisfy HMRC that you are a fit and proper person with regard to the risk of money laundering or terrorist financing. HMRC will want to see evidence of your honesty and integrity and whether you are able to understand and fulfil your obligations under the regulations. In order to reach a decision HMRC will consider a wide range of information including, for example, whether you:
If one or more of the applicants from your business fail the fit and proper test, HMRC won't process your application for registration. They'll write to tell you their decision. If you don't agree with it you can appeal.
If the person who fails the test is the nominated officer, you can either:
If you're a sole proprietor and you fail the test, HMRC will not register your business. You have the right to appeal against HMRC's decision.
If HMRC refuses to register your business, you can't continue to trade while their decision is being reviewed.
If a new person joins your business after you have registered under the Money Laundering Regulations, they might have to apply for a fit and proper test.
A new person in your business might already have passed the fit and proper test when they worked for another Money Service Business or Trust or Company Service Provider. If they tell you that they've already passed the test you can ask HMRC to confirm this.
You should write to the MLR Registration Team giving the person's name, their address, and the MLR registration number of the business for which they were given fit and proper status. You'll find the address of the MLR Registration Team in the section above on completing the fit and proper test application form. The MLR Registration Team will write back and confirm whether the individual is on the list of fit and proper people.
If the person is already on the list, they won't need to re-apply for fit and proper status as long as their circumstances haven't changed so that they would no longer pass the test.
If a new person in your business needs fit and proper status but doesn't already have it they'll need to apply for the test in the normal way.