ECSH45125 - Money service business agent fit and proper test

Introduction

Under regulation 58(5) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), HMRC can and does take account of a principal money service business's (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.
  • 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 (F&P) test is available in ECSH45030.


Conducting F&P tests on agents

Principals are allocated to decision makers (DMs) by the workflow manager. Dependant on how many agents the principal has, the agents will be shared across other DMs in the team; this usually applies to 10 agents or more. The DM allocated to the principal takes the lead on all comms with the principal.

The DM opens communications with the principal by means of a notice to provide information under regulation 66(1) of MLR 2017, requiring the principal to provide information on its agent network by completing the agent data collection template.

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

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

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

Upon allocation of the agents to DMs, 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 DM to continue working the case, but to inform the principal of the findings. The DM 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 DM can proceed to conduct the fit and proper test on the agent.

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

If the DM has suspicions beyond the remit of the F&P 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 F&P test, the DM must inform both the agent and associated principal(s). The DM 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 DM writes to the principal who initially supplied us the agent information. The principal is informed of the failed F&P 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 F&P 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 DM 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 F&P test and to consider breaking ties with that agent.  

Where an agent has passed the F&P test, a letter is sent to the agent informing them of this. Once the DMs have concluded testing of the allocated agents under that principal, a letter confirming this is sent to the principal.