HM Revenue & Customs’ Money Laundering Regulations

Her Majesty's Revenue and Customs (HMRC) in the UK collect taxes in general and helps families and individuals with targeted financial support. But besides these responsibilities, another important responsibility is to work with the FCA to investigate money laundering crimes. HMRC has some legislation put forward to combating financial crimes. HMRC's aim in these regulations is to reduce AML threats in the UK.

What Is HM Revenue & Customs?

HMRC is the UK's tax and customs authority. HMRC's most important goal and responsibility in the UK are to collect money paid for public services and become a targeted financial supporter of families or individuals. HMRC is an impartial and effective authority. HMRC is responsible for a lot of things in the UK. For example, income tax, capital gains tax, oil income taxes, environmental taxes, excise taxes, national insurance. HMRC has three strategic goals among its pioneers. To explain, they are collecting income due, converting taxes and payments for customers, and designing a professional and efficient organization.

Apart from all such responsibilities and goals, HMRC also has a responsibility to study FCA to investigate money laundering crimes. Businesses that are required to comply with the Money Laundering Regulations in the UK have to be supported by authority, and these businesses have to also register with HMRC. There are a number of regulations that HMRC has issued to combat financial crimes, and these regulations also include anti-money laundering legislation in businesses.

Business Sectors Supervised by HMRC for AML Regulations

The regulations established by HMRC to anti-money laundering apply to some institutions in the UK. In the UK, businesses have to decide whether they are required to comply with HMRC regulations and register with HMRC. Thus, they are subject to regulations and are audited regularly. Especially in the UK, seven sectors have to comply with HMRC to be regulated. However, businesses are not required to register with the HMRC if they are supervisory by the FCA or supervisory authority. Here are sectors supervised by HMRC:

  • Bill payment service providers not supervised by the FCA
  • Money service businesses not supervised by the FCA
  • High-value dealers
  • Company service providers not audited by the FCA or a professional organization
  • Real estate agency businesses
  • Accounting service providers not audited by a professional body
  • Rental to agency companies
  • Digital, telecommunications, and IT payment service providers not supervised by the FCA
  • Art market participants 

In The UK Business Responsibilities Under Money Laundering Supervision

Businesses covered by HMRC's Money Laundering Regulations are required to fulfill certain responsibilities. Chief among these responsibilities is to perform "Customer Due Diligence" measures to check whether the customers are who they say they are and perform a risk assessment. In addition to these, businesses have to have internal control and monitoring systems. The nature of the controls to be performed may differ in each business. The nature of these controls varies according to the number of customers, the number and type of services, and the size of the business.

Customer Due Diligence Requirement

Customer Due Diligence (CDD) is done in businesses to identify customers and check whether they are who they are saying. While performing CDD procedures, it is necessary to know the customer's name, photo confirming identity, residence address, and birth date. When starting a business relationship with a customer or a partner, businesses should apply CDD in the customer's changing conditions and in cases of money laundering suspicions. As well as those who are not a high-value dealer 'occasionally execute a transaction worth € 15,000 or more. For high-value sellers, CDD is applied if a payment is made to a supplier worth 10,000 € or more, or if there are occasional transactions of 10,000 € or more.

Internal Controls and Ongoing Monitoring

Businesses subject to HMRC obligations should ensure they have adequate internal control and monitoring systems. If criminals try to use a business for money laundering, these apps alert the necessary people in the business. Thus, the potential danger can be recognized, and the necessary measures can be taken. In addition, suspicious transactions can be created in Suspicious Activity Reports (SARs).  

Money Laundering Supervision Penalties

In the UK, businesses that have to comply with HMRC regulations may impose measures, including a financial penalty, if businesses do not comply with the Money Laundering Regulations. If more serious situations occur, businesses may be subject to criminal prosecution. HMRC tries to take precautions by sending warning letters to the institutions in case of non-compliance with the regulations. Failure to comply with letters may increase the measures to criminal prosecution. These measures of HMRC are to encourage compliance with obligations. The amount of fines varies depending on the cause of non-compliance, the seriousness of the crime, the business's size, and the amount subject to money laundering.

As of 25 July 2018, HMRC has introduced a penalty administration fee for all anti-money laundering control penalties. Businesses will be required to pay a £ 1,500 penalty handling fee for violations if they fail to carry out customer due diligence, risk assessment, policies, controls and procedures, record-keeping procedures, and failure to comply with the warnings them. In addition to these penalties, HMRC may impose up to £ 350 for businesses that do not register, report changes in their business, and do not provide information.

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