ECSH63475 - Regulation 29 - Additional customer due diligence measures: credit institutions and financial institutions
The Law
https://www.legislation.gov.uk/uksi/2017/692/regulation/29
What it means
Where a relevant person is a financial institution (by virtue of the definition in regulation 10, this would include MSBs) or a credit institution (HMRC would not supervise as these would be supervised by the Financial Conduct Authority (FCA)), the relevant person must not set up anonymous accounts or anonymous passbooks (a paper book generally kept by a customer, and used to record transactions (sums deposited and withdrawn with a running total) usually on an account. These tend to be issued by a bank or building society and are generally linked to deposit taking accounts, therefore are unlikely to be relevant to HMRC supervised businesses) for new or existing customers. Additionally, where the anonymous accounts or anonymous passbooks were already in place prior to Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) being implemented and remained in place, the relevant person must apply customer due diligence on these accounts and passbooks.
Purpose
To ensure that there are not any truly anonymous accounts and anonymous passbooks as the relevant person will identify and verify the customer in line with regulation 28 of MLR 2017.
Time Line
A similar requirement was included in regulation 16(3), (4) MLR 2007.
What to establish
Regulation 29(1) MLR 2017 – is the relevant
person a financial institution and have they applied the requirements of regulation 29 in addition to those required under regulation 28.
Regulations 3 and 10 of MLR 2017 establish a definition of financial
institution and the activity, however for the purposes of clarity, these would
be Money Services Businesses (MSBs) who undertake money remittance/money transmission as
defined under regulation 2 of the Payment Services Regulations 2017. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Regulation 29(6) MLR 2017 – Does the/has the
relevant person set up anonymous accounts for any new or existing customers. If
they have, a business would be in breach of this regulation – RELEVANT
REQUIREMENT
Please note - Regulation 29(6) also includes anonymous safe-deposit boxes,
however these are out of scope for HMRC to supervise as anonymous safe-deposit
boxes are under Schedule 2 of MLR 2017 as a service provided by an Annex 1
Financial Institution by providing 14. Safe custody services. Where a relevant
person provides safe deposit boxes, officers will need to review regulation
7(1)(a)(iii) of MLR 2017 as the FCA supervise these businesses.
Regulation 29(7) MLR 2017 - Has the relevant person been providing MSB activity prior to MLR 2017 coming into force on 26 June 2017 AND provided anonymous accounts which were already in place – if so, the relevant person must undertake CDD on the customers where it has provided these accounts. – RELEVANT REQUIREMENT.
Regulation 29(2) to (5), (7A), (8) and
(9) MLR 2017 are not relevant to HMRC. Please see below for further information
Regulation 29(2) to 29(5) MLR 2017 are not relevant to HMRC supervised businesses as they concern
contracts of long-term insurance (“the insurance policy”) which are authorised
and regulated by the FCA. If an MSB is undertaking money remittance alongside
providing contracts of long-term insurance, officers will need to review regulation 7 of MLR 2017 as contracts of long-term insurance would be
considered authorised activity which the FCA supervise where businesses need a
Part 4A permission (see additional link information).
Regulation 29(7A) MLR 2017 – is not relevant to HMRC supervised businesses as the FCA supervise
anonymous safe-deposit boxes. Anonymous safe-deposit boxes are under Schedule 2
of the MLR 2017 as a service provided by an Annex 1 Financial Institution by
providing 14. Safe custody services. For further information on this, officers
will need to review Regulation 7(1)(a)(iii) of the MLR 2017 as the FCA
supervise these businesses.
Regulation 29(8) MLR 2017 is not relevant to HMRC supervised businesses by virtue of open-ended
investment companies needing to be Authorised by the FCA as an “investment
company with variable capital” to which the applicants need to both be
independent of each other and both have Part 4A permissions under the FSMA,
therefore are supervised by the FCA as authorised persons under MLR 2017. For
further information, officers will need to review the FCA handbook (pages
linked below).
Regulation 29(9) MLR 2017 is not relevant to HMRC supervised businesses by virtue of open-ended
investment companies needing to be authorised by the FCA as discussed in 29(8).
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Best Practice
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
AMP N/A
ASP N/A
EAB N/A
LAB N/A
HVD N/A
MSB N/A
TCSP N/A
Further Reading