Briefings & Newsletters
The Spec - Time is running out...
Date: 4th February 2008
Categories: Recruitment Industry team
The Money Laundering Regulations 2007 ("the Regulations") came into force on the 15 December 2007. The Regulations extend the scope of the money laundering legislation to encompass a wider spectrum of businesses. One impact is to bring some types of recruitment businesses within its remit and create legal obligations with potential criminal liabilities for non-compliance.
"Trust or Company Service Providers" ("TCSPs") are now specifically included in the Regulations as a relevant business. A TCSP can include any firm or sole practitioner who are "acting or arranging for another person to act" as a director or secretary of a company or as a partner of a partnership or a similar legal position. HM Revenue & Customs' (HMRC) guidance specifically include recruitment agents and management agencies, involved with the appointment of directors, shadow directors or company secretaries, under the definition. In addition, recruitment businesses that provide payroll services could be caught under the definition of an "Accountancy Service Provider" (under which "Payroll Agents" are specifically referred to in HMRC Guidance) or "High Value Dealer" if the agency is receiving high value payments to fund payments to the employee or to pay tax or NICs on the client's behalf.
As a direct result of the Regulations certain recruitment businesses will be required to be supervised by HMRC. This will involve:
-
registering with HMRC before the 1 April 2008.
-
paying an annual fee based on the number of business premises.
-
an ongoing reporting obligation.
-
implemention comprehensive anti-money laundering systembs (to prevent and report).
-
appointing a money laundering reporting officer and to apply for a "fit and proper test".
Regulation 18 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 ("CEAEB") already provides that the identity of hirer/employer must be verified prior to introduction of a work seeker and under regulation 19 the identity of the work seeker should be obtained. The Regulations extend this requirement by placing an obligation on the agency or business to ensure the hirer/employer is not in severe financial difficulties or engaged in immoral legal practices. Furthermore, the Regulations will impose more severe criminal responsibility upon the specific individuals who fail to comply with its strict requirements. Such criminal liability may include imprisonment. The CEAEB already impose criminal liability upon businesses for certain and specific offences including charging fees to workers, failure to secure the proper conduct of an employment business, making false records or failure to comply with a prohibition order. Any person found guilty of these offences is liable on summary conviction to a fine up to £5,000 for each offence.
The Government's intention in extending the money laundering provisions is to prevent the misuse of corporate entities. It is hoped that the monitoring of TCSPs so tightly will ensure those running such businesses are fit and proper and avoid improper use.
Whatever the intention, it is clear that the impact on recruitment agencies and employment businesses will be significant.
Don't wait until the 1st April. To find out how this will affect your business, and how to comply with the Regulations contact Gareth Kervin on 020 7814 1205.