New money laundering regulations which came into force on 26 June 2017 impose new duties on trustees.
- expansion of the requirements regarding the need for a trustee (or a person arranging for another person to act as trustee) to be registered where those activities are carried on by way of business. This requirement is relevant to SIPPs, but not SSASs; and
- new record-keeping requirements relevant to both SIPPs and SSASs.
In particular, if a company is supervised by the FCA for the purpose of the money laundering regulations and its business involves acting as a trustee or arranging for another person to act as a trustee, it needs to notify the FCA by 26 July 2017.
Breach of the regulations may result in a financial penalty and in some cases criminal liability.
The new money laundering regulations replace the money laundering regulations of 2007. Some provisions re-state existing law, but others impose new requirements.
The requirement for a "trust or company service provider" to register
Like the 2007 regulations, the new regulations require a "trust or company service provider" (TCSP) to be registered. The definition of a TCSP includes a person who, by way of business, acts as a trustee or arranges for another person to act as a trustee. When the 2007 regulations were introduced, HMRC published guidance saying that trustees of "low-risk trusts" were not required to register, and HMRC maintains this approach in relation to the new regulations. HMRC's list of "low-risk trusts" includes occupational pension schemes, meaning that HMRC will not require a SSAS trustee to register. However, the guidance makes no mention of SIPPs. Applying the regulations in a SIPP context:
- a SIPP trustee acting by way of business will be a TSCP and so should already be registered with HMRC under the 2007 regulations unless it is supervised by the FCA or a professional body for the purpose of the money laundering regulations;
- if a SIPP trustee is a dormant company that does not charge for its trustee services, there is no requirement to register, as HMRC's view is that such a company is not acting as a trustee by way of business;
- the TCSP definition covers a person who, by way of business, arranges for another person to act as a trustee. Thus a company that is not itself a SIPP trustee could be a TCSP if its business involves appointing a SIPP trustee;
- a TCSP already registered with HMRC under the 2007 regulations will continue to be treated as registered for a 12 month period from 26 June 2017, but must provide HMRC with additional information to remain registered beyond that period;
- a firm that is supervised by the FCA for the purposes of the money laundering regulations must notify the FCA by 26 July 2017 if it is a TCSP;
- an FCA-authorised person that becomes a TCSP in future must notify the FCA within 28 days;
- a non-FCA authorised person will generally need to be registered with HMRC before starting to act as a TCSP.
Requirement to maintain register and pass information to HMRC
The new regulations contain new requirements for trusts to keep registers of information about the trust. If the trust is liable to certain taxes in respect of the assets or income of the trust, it must pass that information to HMRC by 31 January following the tax year in question. The relevant taxes are income tax, capital gains tax, inheritance tax, stamp duty land tax, stamp duty reserve tax or Scottish land and buildings transaction tax. In particular, trusts need to hold details of each beneficiary's National Insurance number or unique taxpayer reference (UTR) with additional record-keeping requirements applying to beneficiaries who have neither of these. There is also a requirement to provide details of trust assets valued as at the date that information is first provided to HMRC.
The requirements were not drafted with pension schemes in mind, but potentially apply to pension schemes established as trusts, and many pensions professionals have queried how the requirements apply in a pension scheme context and whether HMRC really does want or need to be provided with such detailed information. It is possible HMRC could issue guidance modifying the position in relation to pension schemes. However, this is by no means guaranteed, so SIPP and SSAS providers should consider what steps to take to comply with the regulations as they stand.
Anti-Money Laundering Due Diligence
The new regulations revise the customer due diligence requirements which businesses subject to the regulations (including TCSPs) must apply. SIPP and SSAS providers should review their customer due diligence procedures to ensure they meet the new requirements.
The new regulations were only published in final form two working days before they came into force. This combined with the fact that they have not been drafted with pension schemes in mind means that compliance may prove challenging for SIPP and SSAS providers. As the regulations are now in force and SIPP and SSAS providers should urgently review what action is required to comply.