ECSH46025 - Policing the Perimeter: introduction

What is policing the perimeter?

Policing the perimeter (PTP) is part of the gatekeeping function Economic Crime-Supervision carries out through various teams as part of our assurance of the integrity of the register and includes identifying relevant persons who are not on our supervised business register but should have made an application to register. Once identified we will:

  • Consider whether to prompt the business to register. 
  • Prompt the business to apply for registration. 
  • Consider any prompted application carefully. 
  • Consider what sanctions should apply for:
    • (a) trading while unregistered
    • (b) non-compliance with relevant requirements whilst trading while unregistered. 

 

Why do we do carry out Policing the Perimeter (PTP) activity?

HMRC’s maintenance of our supervised business register (SBR) under Regulations 54 and 55 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) is a strategically important part of our gatekeeping function ensuring that only appropriate persons are on the SBR, and that action is taken to identify and bring to account those trading whilst unregistered in any of our supervised sectors.

We carry out this activity as part of our ‘respond’ function within the HMRC ‘Promote, Prevent, Respond’ compliance strategy.

We recognise that businesses that are trading while unregistered may be at a commercial advantage to those that are registered, by avoiding the direct and indirect costs of registration and compliance with the MLR 2017. They also present a greater money laundering, terrorist financing or proliferation financing risk, as they will not be receiving up to date information from a supervisor or the scrutiny that supervision brings.

Our PTP activity will:

  • Ensure a level playing field.
  • Address wrongdoing with effective, proportionate, and dissuasive sanctions.
  • Bring those who are trading while unregistered, but otherwise largely compliant, under the scrutiny of supervision.
  • Increase compliance with the MLR 2017 in the sectors we are responsible for.
  • Prevent unsuitable businesses from continuing to trade.

Regulation 46 MLR 2017 obliges a supervisory authority, such as HMRC, to effectively monitor and secure the compliance of businesses that it is the supervisory authority for (including compliance with the requirement to register).

 

Prompting an application

The fact that we have prompted someone to make an application – by, for example, issuing an Invitation to Register - does not mean that their application will be authorised. Any application to be on the HMRC’s SBR will go through vigorous vetting, and in some instances, the circumstances of trading while unregistered may be considered serious enough for us not to register (as well as any other appropriate sanctions or prosecution).

 

What action can be taken for trading while unregistered?

The full spectrum of civil and criminal sanctions within the MLR 2017 are available in response to a business that has been trading while unregistered.

The risks presented by a business that is trading while unregistered will depend on a number of factors including the sector, the activity undertaken, the duration and whether the business is otherwise complying with the MLR 2017.

For example, an Estate Agency Business that has been trading for a year but is fully compliant in terms of carrying out customer due diligence, training, staff checks etc, but forgot to register until we prompted them is more likely to receive a penalty than an Money Service Business (MSB) carrying out remittances to high-risk countries without appropriate safeguards and undertaking due diligence checks. The MSB is more likely to not be allowed to register, because this situation is more serious: the activity is high risk and regulation 56 MLR 2017 does not allow an MSB to carry out relevant activity whilst its application to register is pending. Business beneficial owners, officers or managers in this scenario might not be determined to be fit and proper and continuing to carry out relevant activity could lead to further sanctions, which might include criminal prosecution.