ECSH32635 - Visits to MSBs with a large agent network (LAN)

 

Money service businesses (MSBs) may operate as a principal using an agent network  - see ECSH 51080 Principal/Agents networks. This guidance sets out what you should consider if you are allocated an MSB case, (money transmitter), who uses agents, whether you are the lead officer and may need to coordinate agent visits, or if you are a visiting officer carrying out an agent visit.

 

Visit to an MSB principal as the lead officer

Where you are the lead officer carrying out visits to an MSB principal, you should consider the risks relating to MSBs who use others to carry out their activities. Make sure you read the relevant parts of the MSB sector specific guidance - see ECSH51000. 

MSBs who use agents or have a number of their own branches must have robust controls in place. It is the principal who is responsible for any non-compliance by an agent, so you need to make sure that the principal has sufficient oversight over its relevant activities undertaken by agents and staff members.

 

Following the guidance ECSH32630 - Types of intervention - visits to a business with a number of branches, your first visit should be to the MSB principal head office, although there may be times when you would want to visit a principal and its agents at the same time (This content has been withheld because of exemptions in the Freedom of Information Act 2000). You should additionally consider:

  • How many agents the MSB principal has - you should ask for a list from the business and then review this alongside their registration details before the first visit to the head office to identify any discrepancies. You must also check the premises registered with the Financial Conduct Authority. Where you find a discrepancy in the number of agents registered - either additional agents/premises which are not included in the principal’s registration, or agents who have ceased to act for the principal – you must discuss the reasons for this with the business and take appropriate action to ensure it is aware of its obligations to keep the register up to date. Principals must notify any changes to their registration within 30 days – for more information, visit the guidance on GOV.UK. Depending on the reasons for the discrepancy, you will need to consider if a sanction is appropriate.
  • Transactional data obtained from the business may also identify agent codes and/or additional premises which have not been identified on its registration – see ECSH32825 Initial contact – Information and documents requested before an intervention for details of transactional data to request.
  • How agents have been “onboarded” and the checks carried out to confirm they are fit and proper - you can find more details regarding appointing and managing an agent within the published guidance on GOV.UK. How and when does the MSB principal educate its agents in both its operating systems and its anti-money laundering (AML) policies, controls and procedures (PCPs)?
  • Is training provided? – if so, how often, what does the training include and who is providing the training? Does it meet the requirements of regulation 24, including the law relating to money laundering, terrorist financing and proliferation financing (ML/TF/PF), transfer of funds and data protection, as well as regular training in how to recognise and deal with suspicious activity.
  • How is the principal communicating any changes in legislation, or in risks relating to customers, geographic locations, products or services, transactions or delivery channels to its agents? How long does it take for these changes to take effect?
  • What records of training and other communications (for example changes in procedures) does the principal keep?
  • How are agents and transactions monitored to ensure they adhere to the principal’s anti-money laundering/countering the financing of terrorism (AML/CFT) controls, including the ability to identify linked transactions or customers using multiple agents.

MSB principals with no principal activity and no agents

If an MSB is registered for anti-money laundering (AML) supervision, but you discover it does not carry out any activity as a principal, and solely acts as an agent of a different MSB principal, you cannot test any records which it has carried out as an agent. You should ask further questions to understand why the MSB is registered for AML supervision with HMRC and its business activities. If supervision of the business is not needed, you must ask the business to deregister. If the business refuses, or you need more help determining the business activities, please contact the Sector Specialists – see ECSH32545 Roles and responsibilities – Role of the Sector Specialists.

Determining the agent visits

Once you have confirmed that the MSB principal has agents and checked the number of active agents with the business, consideration must be given as to how checks on those agents  will be carried out to ensure that the controls described by the principal are happening in practice. That will be decided on a case-by-case basis based on your findings at head office and any emerging risks.

You should take a risk-based approach when determining the number of agent visits to undertake. You should agree a representative number with the principal, as well as considering the total number of agents, the locations of the agents and the volume of transactions. It may be helpful to consider the table in ECSH32630 Visits to a business with a number of branches. 

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The number of visits should be proportionate to the risks (This content has been withheld because of exemptions in the Freedom of Information Act 2000), and any additional risks identified during your visit/s to head office. You should consider any trends or risk areas identified within transactional data you have requested from the MSB principal as well as any geographical risk. For example, some agents may have a large quantity of high value transactions, or agents may be conducting transactions for customers who are outside of their local area. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) For help with transactional data analysis, you can request support from a data handler - see ECSH32928 Data handler.

You should discuss the number of visits to be undertaken with your team leader and if applicable, the Sector Specialists. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Once the agent visits have begun, if you find that there is non-compliance during the visits, depending on the risks, you may decide to increase the number of agent visits. This is so that you can determine the extent of the non-compliance and whether the areas of non-compliance are systemic. You should be mindful that the number of visits should be proportionate and not carry undue burden to the businesses.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Visiting an MSB agent

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

The only risk assessment you should be asking for is in relation to the activities carried out on behalf of the MSB principal’s, not any risk assessments carried out by the agent for their own business, or the activities of another principal. Remember, there is no requirement for the principal’s business-wide risk assessment to be shared outside of their own senior management team; however, you must ensure  the principal has made any agents/employees aware of the law relating to money laundering, terrorist financing and proliferation financing  (ML/TF/PF), and data protection, as well as given training in how to recognise and deal with transactions and other activities or situations which may be related to ML/TF/PF. To do this, they must understand the risks associated to the activities they carry out on behalf of the principal.

The principal must keep a record of the training given to its agents, although local records may be held by the agent; you are checking this has been effective in mitigating the risks identified by the principal in its risk assessment under regulation 18/18A.

You must always establish and confirm the people carrying out activities on behalf of the principal and consider if that agrees with information held by the principal. This includes the names of all individuals on site during your visit, and those who have access to the principal’s systems. You may also want to ask about any periods of leave or holidays, particularly where there is only one login for the system. You can review these periods against transaction data to highlight if other staff members have access to the system when the person responsible for the transactions is absent.

Remember, the agent may carry out supervised activities on behalf of other principals, carry out supervised activities in their own right, or other unrelated activities (for example, running a retail business alongside the MSB activities). You must raise any concerns you have regarding unauthorised access to systems with the ringmaster.

Remember, you are not carrying out checks on the Anti-money laundering and countering the financing of terrorism (AML/CFT) controls of any other principals the agent is working for; only the agent relationship with the MSB principal who is the subject of the compliance check. You should, however, confirm the details of any other principals the agents carry out work for in order to consider the credibility of the business.

For example, you should establish the names of the principals and the dates they have been/were an agent, the destination of the funds and the amounts sent and/or received. This will help you to clarify the activities carried out by the business as a whole, and the relevant customers/throughput solely relating to the principal involved in the check. However, if a business offers information relating to another MSB, you should record it in your contemporaneous notes ECSH33025.

A referral may be necessary if you suspect non-compliance by another principal - ECSH34205 Intelligence Report. Information provided by an agent relating to another MSB, must not be recorded in notes of meeting if they are being sent to the principal. This will be set out in the briefing pack provided by the ringmaster.

If you encounter any reluctance to providing information or access to the agent’s business premises is refused, you will be responsible for use of powers and penalties relating to non-compliance with a notice under regulation 66 – see ECSH71500, but you must speak to the ringmaster in the first instance, before taking further action.