Sections

Trustees warned over money-laundering rules

Related images

  • Trustees warned over money-laundering rules

UK - A lack of guidance from the government over anti- money laundering rules mean professional pension trustees have to choose between applying for an individual ruling from the government or facing "draconian" penalties, lawyers have warned.

The new money laundering regulations come into effect on April 1 2008 and require a "firm or sole practitioner who by way of business" acts as a pension scheme trustee must comply with the requirements and register with HM Revenue and Customs (HMRC) and implement anti-money laundering systems.

However, law firm Wragge & Co claimed it is not clear from HMRC draft guidance exactly how they decide whether a person is acting by way of business as a pension scheme trustee, as not all paid pension trustees are 'professional' trustees.

Wragge & Co pointed out while there are businesses and individuals which charge for their services as professional trustees, there are others who are trustees of just one scheme and only receive a modest fee.

Ruth Bamforth, associate at Wragge & Co, warned it is not clear from HMRC's guidance whether both ends of this spectrum are caught by the anti-money laundering regime as it has "refused to provide specific guidance on paid pension scheme trustees".

However, she admitted HMRC has indicated a trustee will not be caught by the new requirements if they are:

A trustee of only one pension scheme, The fee paid is determined by the scheme sponsor or the trustee board (not the individual trustee) Not providing services based on sound and recognised business principles.

That said, HMRC has confirmed any trustee unsure of his or her status must write to the government for a ruling, ahead of the April 1 deadline, to find out whether or not they are required to register as a trust or company service provider (TCSP).

If trustees are classed as TCSPs then the anti-money laundering regime requires them to:

register with HMRC and pay an annual fee; apply to pass a 'fit and proper persons' test; put systems in place to prevent money laundering - including a simplified customer due diligence process, ongoing monitoring of transactions, increased record-keeping - and report any suspicious transactions to the Serious Organised Crime Agency (SOCA).

If trustees fail to do so, HMRC could impose unlimited financial penalties for failures in customer due diligence, record-keeping and monitoring, while compliance failures can also lead to up to two years in prison and/or an unlimited fine.

Bamforth stated: "The penalties for failure to comply with the anti-money laundering regime are draconian.  It is unfortunate that HMRC has not seen fit to provide more specific guidance for paid pension scheme trustees.  Whilst each case will turn on its own facts, HMRC could have at least provided some examples to indicate when a paid trustee might be considered acting by way of business.

"Paid trustees need to determine whether or not the anti-money laundering regime applies to them as soon as possible so that they can complete the necessary HMRC formalities by 1 April 2008.  Where they are unsure of their position, we suggest that they contact HMRC as soon as possible for a view," she added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Have your say

You must sign in to make a comment