ECSH81100 - Regulation18(4) concession

鈥痮f The 伊人直播 Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017)鈥痳equires a鈥痳elevant鈥痓usiness to maintain an up-to-date written record of the steps it has taken to comply with regulations 18(1) to (3)鈥疢LR 2017听which relate to the requirement for鈥痑鈥痳elevant鈥痓usiness to complete a risk assessment.鈥齅LR 2017also allows a supervisory authority to waive the requirement to keep such a written record, and to give notice to the鈥痓usiness鈥痮f that decision in writing. This is鈥痳eferred to as鈥�渢he regulation 18(4) concession鈥�.鈥��

Regulation 18(5) MLR 2017 states that the supervisory authority may not鈥痝rant a regulation 18(4)鈥痗oncession鈥痷nless it considers that the risks of鈥痬oney laundering and terrorist financing鈥痑pplicable to the sector in which the business鈥痮perates鈥痑re clear听and understood鈥痓y the business.鈥�������

When can the concession be granted?鈥�听

The regulation 18(4) concession may only be granted to听businesses听who can satisfy听all the following requirements:听听

  • Can鈥痙emonstrate鈥痑 thorough and detailed understanding of the鈥痬oney鈥痩aundering/terrorist financing (MLTF)鈥痳isks to which they are exposed.听

  • Must be a sole trader.鈥�

  • Does not work in/with,鈥痮r is exposed to, any higher risk context or customers. Such as, dealing with high risk third countries, or politically exposed persons (PEPs).听听

  • Does not handle any cash.听

  • Is a听business of a type whose circumstances and dealings rarely change or vary.听

  • Can鈥痙emonstrate鈥痑 good standard of compliance with MLR 2017, in all other obligations.听

  • Has not been found to be in breach of MLR鈥�2017.听

  • Does鈥痭ot have any 耻苍蝉辫别苍迟鈥痗辞苍惫颈肠迟颈辞苍蝉鈥痜or relevant offences under schedule 3鈥疢LR 2017 (where a beneficial owner,鈥痮fficer鈥痮r manager (BOOM)鈥痮f the business has an unspent conviction for a relevant offence under schedule 3鈥疞R 2017 the BOOM cannot be鈥痑pproved,鈥痑nd鈥痑ny approval granted is automatically invalidated).鈥�

  • Is听not a new business, which has not undertaken a risk assessment and cannot鈥痙emonstrate鈥痑 clear and detailed understanding of risk.听

No鈥痗oncessions鈥痟ave been granted鈥痶o鈥痙ate;鈥痶herefore,鈥痑ll existing鈥痵upervised鈥痓usinesses should already have a written risk assessment in place, to comply with MLR 2017.鈥��

We should not鈥痝rant the regulation 18(4) concession to any business鈥痑lready registered with HMRC,鈥痺hich does not have an existing written risk assessment. This would mean they have been in breach of regulation 18(4) MLR 2017 from at least鈥痶he date of their registration or鈥�1st January 2018 (the date from which HMRC started to take enforcement action)鈥痮r the date they began undertaking relevant activity鈥痠f鈥痶hey started trading after this date. To do otherwise risks granting the regulation 18(4) concession to businesses which are simply trying to avoid having to create one. However, this should not prevent a newly registered, low-risk, and compliant business from seeking a concession under regulation 18(4) MLR 2017.鈥�

Businesses that do not meet the requirements above cannot benefit from the regulation 18(4) concession.鈥�

In addition:鈥�

  • This should be a concession only used in limited circumstances where businesses meet鈥痑ll鈥痶he relevant criteria and should only be granted with care.听

  • It may only be granted in response to a formal request by a鈥痓usiness鈥�(it must not be granted by鈥疕MRC鈥痺ithout a formal request).鈥�

  • A鈥痓usiness鈥痺ho is or has been carrying out relevant activity but鈥痙oes not have the required written鈥痳isk assessment鈥痵hould be considered as being in breach of MLR鈥�2017鈥痷nless they can produce written confirmation from鈥疕MRC鈥痶hat the concession was granted 鈥� and that this can be confirmed by鈥疕MRC鈥檚 own records.鈥�

  • HMRC will, in writing, withdraw a previously given concession if the鈥痓usinesses鈥欌�痗ircumstances change in such a way that any of the criteria listed above no longer apply.听

With regards to鈥痶he鈥痲ualifying criteria, where a business has previously been warned or sanctioned for not having a written record of their risk鈥痑ssessment,鈥痶hey should not usually be granted a concession under regulation 18(4) MLR 2017.听

To what does the concession apply?鈥�听

The risk assessment referred to in regulation 18(1) MLR 2017, and to which the concession in regulation 18(4) MLR 2017 applies,鈥痳equires a鈥痳elevant鈥痓usiness to鈥痶ake into account鈥痑ll the elements listed in regulation 18(2)(a) and (b) MLR 2017, and any further factors which the business has considered over and above the regulation 18(2) MLR 2017 list.听

The factors set out in regulation 18(2) MLR 2017 that must be鈥痶aken into account鈥痑re as follows:鈥�

  • Information made available by HMRC as supervisory authority under regulations 17(9) and 47 MLR 2017.鈥�

  • Risk factors including factors relating to:鈥�

  • Customers of the business.鈥�

  • Countries or geographical areas in which the business鈥痮perates.鈥�

  • Products or services offered by the business.鈥�

  • Transactions carried out by the business.鈥�

  • Delivery channels used by the business.鈥�

If鈥疕MRC鈥痠s concerned鈥痶hat鈥痶he MLTF risk will be increased鈥痓y the business not鈥痬aintaining鈥痑n up-to-date written record of any of these factors, then the regulation鈥�18(4) concession should not be granted.鈥�

Operational considerations鈥�听

When writing to inform a鈥痓usiness鈥痮f our decision鈥痶o grant the concession, we should make clear that they should regularly review whether all the requirements listed鈥痑bove鈥痗ontinue to be met.听The听letter should explain that听if听one or more of the requirements is no longer met, the business must听immediately听re-assess and document its risks, then update its policies,听controls,听and听procedures听as necessary. They should also write to inform HMRC that the concession is no longer applicable.听

When writing to inform a business鈥痶hat we will not be鈥痝ranting鈥痶he concession, we should make鈥痮ur reasons for that decision clear.鈥��

HMRC鈥痭eeds to record which鈥痓usinesses鈥痟ave been granted鈥痑nd refused鈥痶he regulation鈥�18(4)鈥痗oncession.鈥疌hecks need to be undertaken鈥痑t suitable intervals on businesses鈥痺hich have been granted the concession鈥痶o ensure that the regulation 18(4)鈥疢LR 2017 criteria still apply. We might also wish to consider 鈥榥udge鈥� interventions such as occasional emails reminding the business of the importance of reviewing whether the regulation18(4) MLR 2017 criteria still apply.听

HMRC should not,鈥痑nd鈥痗annot,鈥痠mpose any form of sanction on a business for鈥痜ailing to keep鈥痑 written record of an MLTF risk assessment when the concession has been given, unless the business no longer meets the criteria above and have failed to notify HMRC of the change.听

The鈥痙ecision鈥痺hether or not鈥痶o grant a concession鈥痠s not appealable 鈥� regulation 18(4) MLR 2017 decisions are not鈥痠ncluded鈥痠n the list of appealable decisions鈥痺ithin鈥�疢LR 2017 - see鈥�ECSH90000.鈥�

Who should make the decision about whether the concession applies or should be removed?鈥�听

Whether a鈥痓usiness鈥痵hould be granted the regulation鈥�18(4) MLR 2017 concession is an operational decision.鈥疪esponsibility鈥痜or the decision, of granting, or removing, the concessions its with the Grade 7 compliance leads, although the Economic Crime -Supervision risk and intelligence team should also be consulted on the decision.听

Removal of the concession where it has previously been granted is an operational decision, and consideration towards this course of action could be made when the鈥痓usiness鈥痠s unable to鈥痙emonstrate鈥痑 sufficient understanding of risk. Removal of the concession must听be confirmed in writing, and the business, will, from that point, need to revert to鈥痬aintaining鈥痑 written鈥痳ecord of its MLTF risk assessment. A reasonable deadline should be provided for the business to鈥痗omply with鈥痳egulation鈥�18(4) MLR 2017 requirements.鈥疘t is an operational鈥痙ecision as to whether the officer would want to review the鈥痳isk assessment.听

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