Other
High
Value Dealers
New
regulations aimed at preventing money laundering became effective
early in 2004. Known as the Money Laundering Regulations 2003
(the Regulations), these place new onerous registration and
procedural requirements on businesses that deal in goods and
accept large cash payments.
Customs and Excise has been given the responsibility for controlling
High Value Dealers. We outline below the main requirements
of the new Regulations and the registration process.
Which
Businesses are Affected?
Businesses
that meet the definition of a High Value Dealer (HVD) are
affected by the Regulations with effect from 1 March 2004.
The requirement to register is effective from 1 April 2004.
A business is defined as a HVD where it deals in goods and
accepts cash equivalent to €15,000 (around £10,0001)
or more in any currency for any single transaction. Such transactions
are known as High Value Payments (HVPs).
Businesses that only occasionally accept such transactions
are included. Businesses that do not accept large amounts
of cash or deal in services are not affected.
It is anticipated that the businesses most affected will be
those that deal in high value or luxury goods, works of art,
cars, jewellery and yachts.
However, the new regime applies to everyone who accepts sufficiently
large amounts of cash for goods and any business could potentially
be registerable.
How
Will My Business be Affected?
If
your business does deal in goods and does accept large cash
payments then you are required to:
- register
with Customs and Excise and pay an annual registration fee
- implement
policies and procedures to protect yourself from being used
by money launderers.
If
you don’t know whether you will sell goods for this amount
and do not register, you will be obliged to refuse any HVPs
or insist upon payment by another means.
Alternatively, you may delay a HVP and register with Customs.
Background
to the Requirements
Why
has this regime been introduced?
The aim of the new regime is to help protect society and to
combat money laundering and the criminal activity which underlies
it, including terrorism.
As money launderers have resorted to more sophisticated ways
of disguising the source of their funds, new legislation and
regulation aimed at catching those involved has become necessary.
The primary legislation is predominantly contained within
the Proceeds of Crime Act 2002 and the Terrorism Act 2000.
What is money laundering?
Money laundering is the process by which criminally obtained
money or other assets (criminal property) are exchanged for
‘clean’ money or other assets with no obvious link
to their criminal origins.
Criminal property
Criminal property represents the proceeds of criminal conduct.
This includes any conduct wherever it takes place, which would
constitute a criminal offence if committed in the UK. It not
only includes, for example, drug trafficking, tax evasion,
fraud, forgery and theft but also any other criminal offence
committed for profit.
It is important therefore to remember that money laundering
now includes the proceeds of any crime and not simply the
more traditionally associated crimes such as drug trafficking
and prostitution.
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Under
the legislation there are three principal money laundering
offences covering criminal activity and two related
money laundering offences:
- concealing,
disguising, converting, transferring or removing (from
the United Kingdom) criminal property
- making
arrangements which facilitate the acquisition, retention,
use or control of criminal property by or on behalf
of another person
- acquiring,
using or possessing criminal property
- failure
to disclose knowing or suspecting or having reasonable
grounds for knowing or suspecting that another person
is engaged in money laundering or terrorist funding
- tipping
off any person that a disclosure has been made, knowing
or suspecting that doing so is likely to prejudice
an enquiry.
HVDs
must be aware of how these actions could affect their
business, for example, as the proceeds of crime are
spent (or laundered) within their business.
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The importance of the new regime
The law imposes very severe penalties on anyone involved in
money laundering. The Regulations require HVDs to adopt anti
money laundering procedures to protect themselves against abuse
by money launderers and the risk of prosecution.
The
Registration Process
Customs
and Excise form MLR100 must be completed. Customs will then
send a certificate showing an MLR number within 45 days.
Registration is required where a business:
- accepts
the equivalent of €15,000 or more in cash for a single
transaction or
- takes
a policy decision to carry out such transactions.
Every
legal entity through which a HVD business is run must be registered.
An annual fee of £60 is payable for each HVD trading
premises that is required to be registered.
Businesses that fail to register could be liable to a civil
penalty if they carry out a HVD transaction.
What
Anti Money Laundering Policies and Procedures are Required?
These
can be summarised into the acronym CATCH:
- Confirm
the identity of your customers
- Appoint
a Money Laundering Reporting Officer (MLRO)
- Train
your staff
- Control
your business by having anti money laundering systems in
place
- Hold
all records for at least five years.
Confirm
the identity of your customers
HVDs must establish the identity of any customer who makes
a total cash payment equivalent to €15,000 or more for
a single transaction.
Establishing identity requires you to be satisfied that your
customer is who they claim to be by obtaining evidence of
their name and address.
Appoint a Money Laundering Reporting Officer (MLRO)
This is a very important role within a HVD business and should
be performed by a suitably senior person. The main roles of
the MLRO should be to:
- establish
the necessary procedures to implement the requirements of
the Regulations
- receive
and review reports of possible money laundering from others
involved in the business
- decide
whether to report to the National Criminal Intelligence
Service (NCIS).
NCIS
NCIS is the government body to which all suspicions of money
laundering should be reported. Currently, there are two reporting
templates available on their website (www.ncis.gov.uk)
upon which NCIS prefers reports to be made.
There will be times when an internal report of suspected money
laundering is received by the MLRO, where the transaction
is not yet complete. Under these circumstances there are specific
NCIS procedures to follow and you must wait until NCIS gives
consent for the transaction to go ahead.
Train your staff
All managers and anyone involved in the business who deals
with customers must be trained to be aware of:
- the
law regarding money laundering offences
- business
policies and procedures relating to the prevention of money
laundering
- identification
and know your customer procedures
- recognition
and handling of transactions which may be related to money
laundering
- internal
reporting
- record
keeping.
Staff
should be trained regularly on this subject and training should
be repeated at least every two years.
Control your business by having anti money laundering systems
in place
HVDs must:
- put
in place clear written policies and procedures relating
to the prevention of money laundering and make employees
aware of them
- ensure
that any suspicious activity or transactions are properly
identified and reported.
Hold
all records for at least five years
Only records relating to HVPs need to be kept. There are,
however, several different types of records to maintain.
Customer ID
Legible copies of the forms of identification presented by
customers should be retained.
Customer ID records should be kept for at least five years
from the date that the relationship with the customer finishes.
Business records
Records of HVPs must be kept and should include the name and
address of the customer. The transaction details should also
be kept but in many cases where invoices are retained, a cross-reference
to this will be sufficient. These records should be kept for
five years.
Records of reports and other correspondence with NCIS should
also be retained for at least five years.
Failure
to Comply
Businesses
may be liable to a civil penalty up to £5,000 for failing
to comply with a registration requirement.
Failing to comply with responsibilities under the Regulations
could lead to either prosecution or a civil penalty.
How
We Can Help
The
new regime brings about significant change for those businesses
that deal in goods and are prepared to accept large cash payments.
If you would like to discuss any of the issues raised above
please do contact us. We are able to provide comprehensive
assistance with regulation and Customs and Excise matters
such as:
- HVD
registration
- design
and implementation of anti money laundering policies and
procedures
- registration
and deregistration
- completion
of VAT returns.
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of page
For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
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