ECSH44425 - Agent Guidance

The Principal-Agent relationship 

A Principal-Agent relationship exists when one business (the principal) appoints another business (an agent) to undertake relevant activity on its behalf. A business that is registered for anti-money laundering supervision can appoint multiple agents which is known as an agent network.  

A business may be an agent of multiple principals.

Who is responsible for registration?

A principal will either include its agent's premises in its anti-money laundering supervision registration or require the agent to apply registration in its own right. This will depend on how much control the principal has over its agent. See the GOV.UK website for guidance as to who is responsible for the registration of an agent. 

A Money Service Business (MSB) that acts as principal is the party that contracts with its customers through its agent and is therefore the owner responsible for the transaction. As an MSB principal is responsible for the transactions that an agent conducts on its behalf, the MSB principal must include its agent's premises in its anti-money laundering supervision registration details before the agent begins to provide relevant activity on the principal's behalf. 

If there is any uncertainty as to whether a principal-agent relationship exists, asking the following questions will help in establishing the correct position: 

  • Does the business have a written contract with another business to supply services on their behalf? 

  • Who determines the charges and if appropriate any currency exchange rates? 

  • Who does the customer enter into a contract with? 

  • What are the responsibilities under the contract of both parties? 

  • If a computer system is used to maintain records, which business supplies it and is responsible for its ongoing maintenance and development? 

  • What name appears on documents such as order forms, receipts, contracts that are used and issued to customers? 

Businesses registering as an agent and in their own right 

There are occasions where a business acts as an agent and must register with HMRC as an MSB in its own right. For example, an MSB that acts as a money transmission agent may wish to register with HMRC to provide currency exchange services. In this scenario, the business must have its own registration with HMRC as a currency exchange provider and must also be included in the registration details of its principal to act as a money transmission agent. 

Principals and the Fit and Proper (F&P) test 

Caseworkers inspecting a principal’s risk assessment and policies, controls, and procedures (PCPs) should ensure that the business has identified, assessed,and mitigated the risks presented by the use of an agent.  

An MSB principal should: 

  • have procedures in place to ensure that its agents would satisfy the F&P test 

  • develop an adequate training programme to ensure the agent understands its anti-money laundering and other obligations, and keeps staff training up to date 

  • document and implement clear and consistent standard operating procedures for the conduct of the principal’s business 

  • establish the profile of the agent’s business transactions for the purpose of analysing trends and patterns of the transactions to ensure proper reporting of suspicious transactions to the principal. 

  • ensure the agent flags suspicious transactions reports to the principal, for reporting to the National Crime Agency by the principal 

  • carry out ongoing monitoring of customers and business transactions