Money Laundering Regulations 2007

The Money Laundering Regulations (SI 2007/2157) come into force on 15 December 2007, and will replace the 2003 Regulations.

The new regulations require that accountancy, trust, legal and company service providers, acting in the course of a business conducted by them in the UK, must be licensed by a supervisory authority and maintain anti money laundering controls. Those who conduct business whilst unlicensed will face a financial penalty or imprisonment for a term of up to two years.

It is not clear how the territorial scope of the regulations is to be construed and whether it will apply only to those businesses with a trading presence in the UK or whether it may also extend to those businesses without such a presence but who sell their services into the UK, such as the less respectable providers of "tax efficient" offshore companies and trusts. Whilst it would appear that only the former are likely to be covered this might prove counterproductive in so far as it imposes an additional compliance burden on UK providers, thereby placing them at a commercial disadvantage when compared to those who provide equivalent services but fall outwith the scope of the regulations.

Activities hitherto unregulated but now requiring supervision will include, inter alia, bookkeeping, accounting, tax advice, trust and legal advice, conveyancing, company formation, registered office and company secretarial facilities, and the direct or indirect provision of directors and trustees.

For those firms who are not members of appropriate professional bodies, licensing will be offered by HM Revenue & Customs with an effective date for registration of 1 July 2008 (subject to confirmation). Whilst a minimum standard of qualification, competence and experience will be inherent in those firms falling to be supervised by their professional accounting or legal bodies, HMRC will be licensing others by reference only to a negative fit and proper test; where, in effect, a licence will be available to any applicant who can satisfy the somewhat less than reassuring minimum criteria that the applicant has no past record of offences for fraud, terrorism, money laundering or similar. Furthermore, current indications are that the £50 licensing fee to be levied by HMRC will be cheaper than the equivalent cost of licensing charged by the professional bodies.

Interestingly, perhaps, regulation 28(2)(h) seems to be receiving little attention, even by STEP who have already raised concerns over the fit and proper standard. This long stop regulation provides that a licence will be refused to a person who ... "is otherwise not a fit and proper person with regard to the risk of money laundering or terrorist financing". With the minimisation of risk being central to the purpose of anti money laundering legislation, might there be a case for saying that there must be a reasonable education and experience standard imposed upon all who are to be licensed and that those who cannot satisfy such a standard must, by definition, represent an unacceptable risk merely through their lack of education or experience ?