Styperson POPE

Strategy & Compliance for Investment Firms

Trusts & Money Laundering – HMRC AML registration for a TCSP

We’ve recently been doing some work with a couple of trusts which, because the investment returns aren’t shared with the trust’s settlors, are not collective investment schemes.  This means that the managing trustees don’t need to be regulated (although there are regulated custodians and investment managers involved) and therefore don’t automatically apply anti-money laundering measures.  This raises an important question…

What steps should non-investment trusts take under the Money Laundering Regulations 2007?

Well, as so often with compliance… it depends.

The first consideration is whether they should be regulated by the FSA.  This will depend on the intention of the trust.  If it is for investment purposes (such as a unit trust), and it has more than one settlor, it may well be a collective investment scheme (CIS) and therefore require an Operator.  One we’ve worked on was for the provision of funerals; these aren’t a CIS but are separately regulated unless they meet a number of detailed exemption criteria.

If the trust’s activities don’t require regulation by the FSA, it may still require registration with HMRC as a Trust or Company Service Provider (several of our clients fall into this relatively new and quite wide category).  This will be the case where an individual or company acts, or arranges for others to act, as a trustee by way of business.  Charities and trusts created by wills are generally excluded but a lot of trusts used for tax planning or asset protection will be caught.

If a trust or its managing trustees require regulation by the FSA or registration with HMRC, then the Money Laundering Regulations 2007 (MLR) will apply.

This will generally mean that they have to identify, and then verify the identity of, anyone with whom they do business.  Depending on the nature of the relationships, this is likely to include the settlors (the people who give money or property to the trust), the beneficiaries (the people to whom the trust gives money or property), the trustees themselves, and possibly others as well.

The depth of these checks will depend on the risks the trust faces of being used for money laundering and financial crime.  The first priority of any company subject to the MLR is to assess this risk according to the requirements of the regulations.

Even if the trust doesn’t require regulation or registration, if it deals with individuals as settlors or beneficiaries, the trustees should seriously consider implementing some procedures to identify and verify the people on whose behalf they act.  These can be a lighter touch version of the MLR requirements but they provide an excellent template for best practice and identification techniques.

If you’re involved in the management of a trust and would like to discuss the Money Laundering or Regulated Activity Order regulations which apply to you, do please contact Simon Webber, StypersonPOPE’s MD, on 07710 260 717 or sw@strategic-compliance.co.uk.

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