The 5th Money Laundering Directive came into effect on 10th January 2020. With it came a critically important change to the definition of ‘tax advisers’.
This has the potential to bring many more firms (and freelancers) into the scope of the Money Laundering Regulations.
Some firms are probably (unintentionally) operating unlawfully. All firms within the scope of the Money Laundering Regulations must be separately approved by the Solicitors Regulation Authority (SRA). Individual owners and managers of these firms also require authorisation.
In addition, departments within larger firms may have been brought into scope, with all the AML controls that entails.
What’s the change?
The definition of Tax Adviser has been broadened considerably. It now includes:
“a firm or sole practitioner who by way of business provides material aid, or assistance, or advice in connection with the tax affairs of other persons, whether provided directly, or through a third party, when providing such services”
The SRA has confirmed that material aid or assistance can be as simple as:
- sending the client a link to specific HMRC information relating to their circumstance
- asking assistance from a tax specialist on a will or an employment settlement.
This is incredibly broad. Anything more than simply pointing at the general HMRC page or saying “get tax advice”, could be enough to pull you into scope.
Who will it affect?
- Firms who do not already fall within the scope of the Money Laundering Regulations, but provide any tax advice, aid or assistance.
- Departments within firms already in scope, but who have considered their practice to be out of scope of the Money Laundering Regulations, will need to consider whether they are now caught. (Employment, wills, family, and ligation: we’re looking at you.)
What do we need to do?
Firms not currently registered for AML purposes with the SRA
If you provide tax aid, assistance, or advice you will need to:
- Register with the SRA by 10th January 2021 (form FA10 via your firm’s mySRA account)
- The registration involves having your Beneficial Owners, Officers and Managers (BOOMs) approved (each person will need a DBS check)
- You will need to appoint a Money Laundering Compliance Officer (MLCO) and a Money Laundering Reporting Officer (MLRO)
- Carry out a Risk Assessment of your firm
- Establish Policies, Controls and Processes to comply with the Money Laundering Regulations
- Train your staff on the Money Laundering Regulations
- Consider whether you should report yourself to the SRA under the Codes of Conduct
Firms already registered for AML purposes with the SRA
- Check your departments that are currently out of scope and whether they will now fall within scope
- Update your Money Laundering Risk Assessment
- Update your Policies, Controls and Processes
- Ensure relevant staff have the relevant training.
We recommend that, even if you are certain the new definitions do not affect your firm, you record your decisions and reasoning.
Please contact us for further information.