ECSH45125 - Money Service Business Agent fit and proper test

Introduction

Under regulation 58(5) of MLR 2017, HMRC can and does take account of a principal MSB’s view as to the fitness and propriety of its agents. Principals are responsible for ensuring that their agents:

  • are included as agents under its own registration;
  • are fit and proper (F&P) at the time of onboarding; and
  • remain F&P for the duration of the business relationship with the principal.

HMRC will monitor this and undertake checks of its own.

Further guidance on the fit and proper test is available in ECSH45030.


Conducting F&P tests on agents

Principals are allocated to caseworkers by the workflow manager, dependant on how many agents the principal has, the agents will be shared across other caseworkers in the team; this usually applies to 10 agents or more. The caseworker allocated to the principal takes the lead on all comms with the principal.

The caseworker opens communications with the principal by means of a notice to provide information under regulation 66(1), requiring the principal to provide information on its agent network by completing the agent data collection template. We are currently trialling a different way of working by contacting the principal first about our intentions and requesting the information informally.

Upon receipt of the agent data collection template, the caseworker checks that the template has been completed fully and saves this in the MSB Agent SharePoint site. The workflow manager is informed who then populates the Case tracker and allocates these agents to caseworkers. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Upon allocation of the agents to caseworkers, they must first check for unspent Schedule 3 convictions using the information captured in the agent data collection template. If an individual has an unspent Schedule 3 conviction, they automatically fail the fit and proper test. Further information on spent and unspent convictions can be found in ECSH45025. At this stage, we would not expect the caseworker to continue working the case, but to inform the principal of the findings. The caseworker at this stage would check the datasets for any association with other principals and inform them also.

If no unspent Schedule 3 convictions have been identified, the caseworker can proceed to conduct the fit and proper test on the agent.

The fit and proper test (regulation 58(4)) is to determine the suitability of the agent and its beneficial owners, officers and managers (BOOMs) to undertake their roles and establish the risk of them being susceptible to money laundering and terrorist financing.

If the officer has suspicions beyond the remit of the fit and proper test, such as the legitimacy of the information being passed to us, they should consider referring the case to the compliance team for either a desk-based intervention or visit, first consulting either the workflow manager or senior officer. Likewise, if an agent contacts us after they have received the regulation 66 notice requesting information from them, they inform us that they wish to no longer act as an agent, it is recommended that a compliance intervention is arranged.

In the event that the agent has failed the fit and proper test, the officer must inform both the agent and associated principal(s). The caseworker will write to the Agent informing them that they have failed and reasons why, the letter is usually sent by recorded delivery.

Once we have allowed a reasonable amount of time for the letter to have been delivered to the agent, the caseworker writes to the principal who initially supplied us the agent information. The principal is informed of the failed fit and proper test, we do not give reasons to the principal why the agent has failed. It is at this point in the process that we advise the principal to consider whether it should break ties with the agent.

If the principal continues its relationship with the agent, they may be at risk of no longer being considered fit and proper and may be subject to sanctions, including cancellation of their registration. Further guidance on determining an appropriate sanction is available in ECSH81075. Further guidance on cancellation of a registration is available in ECSH48000.

During the risking process, the caseworker will have established if the agent is associated with more than one principal, and if so, who they are by referring to the data sets. These principal(s) will also be informed of the failed fit and proper test and to consider breaking ties with that agent.  

Where an agent has passed the fit and proper test, a letter is sent to the agent informing them of this. Once the officer(s) have concluded testing of the allocated agents under that principal, a letter confirming this is sent to the principal.