The Money Laundering Regulations 2007

Reference: UK/2007/SI/2157

The Money Laundering Regulations 2007 are designed to protect the UK financial system. If your business is covered by the regulations you must put in place certain controls to prevent it being used for money laundering by criminals and terrorists.

Nominated officer

These include appointing a 'nominated officer', checking the identity of customers and keeping all relevant documents. You must also report any suspicious activity to the Serious Organised Crime Agency.

If your business is covered by the regulations it must be monitored by one of the supervisory authorities. It may already be monitored, for example by the Financial Services Authority or by a professional body. But if it's not, and your business falls into one of four designated business sectors, you'll probably need to register with HM Revenue & Customs (HMRC).

This guide will help you decide whether Money Laundering Regulations apply to your business and understand your responsibilities if they do.

What is money laundering?

Money laundering means exchanging money or assets that were obtained criminally for money or other assets that are 'clean'. The clean money or assets don't have an obvious link with any criminal activity. Money laundering also includes money that's used to fund terrorism, however it's obtained.

Money Laundering Regulations

The Money Laundering Regulations 2007 came into force on 15th December 2007 and are prescribed for the purposes of sections 168(4)(b) (appointment of persons to carry out investigations in particular cases) and 402(1)(b) (power of the Authority to institute proceedings for certain other offences) of the Financial Services & Markets Act 2000.

They also revoke the Money Laundering Regulations 2003. The Regulations provide for various steps to be taken by the financial services sector and other persons to detect and prevent money laundering and terrorist financing.

Money laundering being a crime in itself is usually associated with all types of organised crime where huge profits in cash are generated: trafficking of drugs, weapons, human beings, fraud. It is the process by which criminal proceeds are 'cleaned' so that their illegal origins are hidden. The scale of the problem is considered to be enormous and has been given strategic priority across the EU.

All businesses that are covered by the regulations have to put in place suitable anti-money laundering controls. If the regulations apply to your business you must put these controls in place as soon as possible. This means that your organisation's digital systems and networks must also be compliant.

Main provisions

The Money Laundering Regulations 2007 cover credit institutions; financial institutions; auditors; insolvency practitioners; external accountants and tax advisers; independent legal professionals; trust or company service providers; estate agents; high value dealers; casinos.

They must undertake ‘due diligence on identifying and verifying customers using documents, data and or information as evidence and supplied by a reliable and independent source. Beneficial owners, such as shareholders with more than 25% holdings or voting rights must also be risk-assessed. Information must also be obtained on the purpose and intended nature of the relationship.

Where due diligence cannot be done, the business relationship must be terminated.

Ongoing customer monitoring must take place

Retention of records

Records must be kept for 5 years

Policies and procedures

A relevant person in the organisation must establish and maintain appropriate and risk-sensitive policies and procedures relating to

  • customer due diligence measures and ongoing monitoring;
  • reporting;
  • record-keeping;
  • internal control;
  • risk assessment and management;
  • the monitoring and management of compliance with, and the internal communication of, the policies and procedures.

Staff training

Training must take place to ensure relevant employees of his are: made aware of the law relating to money laundering and terrorist financing; and regularly given training in how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing.

Are you already supervised for money laundering purposes?

Some businesses covered by the Money Laundering Regulations are already supervised by a designated supervisory authority like the Financial Services Authority (FSA), or by a professional body like the Law Society that acts as a supervisory authority. So they don't need to register with HM Revenue and Customs (HMRC).

Supervisory authorities

The supervisory authorities are:

  • Gambling Commission

There are also designated professional bodies that act as supervisory authorities. These are:

  • Association of Taxation Technicians
  • General Council of the Bar
  • General Council of the Bar of Northern Ireland

Do you need to register with HMRC for Money Laundering Regulations?

Money Laundering Regulations apply to a number of different business types. If the regulations apply to you, your business needs to be monitored by a supervisory authority.

It's possible that your business is already monitored, for example because you belong to a designated professional body or because your business is registered with an authority like the Financial Services Authority.

But if your business isn't already monitored, and it falls into one of four designated business sectors, you'll probably need to register with HM Revenue & Customs (HMRC), although there are a few exceptions.

HMRC is the supervisory authority for the following four business types:

  • Money Service Businesses not supervised by the Financial Services Authority (FSA)
  • High Value Dealers
  • Trust or Company Service Providers not supervised by the FSA or a professional body
  • Accountancy Service Providers not supervised by a professional body

If you carry out activities typically associated with the above by way of business and you aren't already registered, you'll need to register with HMRC.

Further information