ECSH52050 - Why do the Money Laundering Regulations include Trust or Company Service Providers

ECSH52050 Why Do the Regulations Include Trust or Company Service Providers (TCSP)

Money laundering takes many forms. The services provided by TCSPs can be used to help obscure the identity of beneficial owners and support the channelling of illicit funds through layers of corporate structure, hiding their true criminal origin. 

Corporate structures are used globally for money laundering schemes, particularly where they offer opacity that can be exploited to conceal beneficial ownership. UK companies and partnerships are likely to be particularly attractive for money laundering due to the UK’s international reputation for trade and finance and rule of law.This means those TCSPs who form firms are at risk of these services being exploited for criminal purposes. Beyond firm formation, other TCSP services are also attractive for money laundering as they provide opportunity to exploit corporate solutions primarily aimed at supporting UK businesses yet offer criminals the opportunity to facilitate fraudulent or illicit business activity, or to conceal the identities of those controlling organised criminal operations. The nature of TCSP services mean they are both offered and sought by a range of businesses spanning many UK industries, and therefore the risk of their exploitation is widespread. 

TCSPs may not routinely deal directly with a customer’s funds but should focus on risks presented by the persons they are dealing with, and the nature of the services provided to or sought by them. TCSP businesses provide the services listed in TCSP Introduction and enter into a business relationship with all their customers. Through this relationship, the TCSP may gain access to information that could give them reason to suspect money laundering or terrorist/proliferation financing activity.

The Money Laundering Regulations (MLR) 2007  extended the scope of the MLR 2003 to the TCSP sector with effect from 15 December 2007, when the sector was placed under the responsibility of HMRC as a statutory supervisor, unless the TCSP is supervised by the Financial Conduct Authority (FCA) or one of the Professional Body Supervisors (PBs) listed in Schedule 1 of the Regulations.  This position remains unchanged under the MLR 2017 (though under an amendment to those MLR, HMRC is also responsible for maintaining a register of all supervised UK TCSPs).

In addition, the business and its beneficial owners, officers and managers as defined in the Regulations are required to pass the “Fit and Proper Persons” determination before the business can be added to the AML register and is able to carry out activity as a TCSP.

Where a TCSP is supervised by a PB, this information is maintained by HMRC on a register (the ‘TCSP Register’) of all supervised UK TCSPs. Regulation 58 of the MLR 2017 requires that HMRC consult the PB and may rely on the PB’s determination, as to whether or not that TCSP business and its BOOMs are fit and proper persons. Further information on the TCSP Register is available in ECSH52075 Professional Body Supervision of Trust or Company Service Providers(TCSP).