The fit and proper test and HMRC approval

WhenUnder youthe signMoney inLaundering, toTerrorist theFinancing anti-moneyand launderingTransfer supervisionof asFunds an(Information existingon customer,the youPayer) must:

• provideregulations the2017 date(the ofregulations), birthmoney forservice thebusinesses responsible(MSBs) peopleand withinTrust youror business
• confirmCompany whetherService theyProviders have(TCSPs) passedare HMRC’ssubject to the fit and proper test,test.

  The ortest haveis approval

Youto willmake onlysure needthat tothe provideapplicant, thisand informationits once.

Responsiblebeneficial owners, officers and managers (BOOMs) are suitable people into yourundertake organisationthose willroles. haveBOOMs receivedmust apass letterthe fromtest before HMRC confirmingwill thatregister theythe have:business.

• passed

  Whilst thea test

• approvalperson’s skills and experience to act asin a responsiblegiven person

Werole willis useconsidered thisas informationpart toof dothe test, the fit and proper test ondoes younot andtest relevantwhether responsibleyour peoplebusiness runningis theprofessionally business.run or operated.

The fit and proper test

HMRC carries out the fit and proper test toas makepart sureof the anti-money laundering supervision registration process for:

• money service businesses
• trust or company service providers

HMRC also carries out fit and proper checks after you meethave theregistered requirementsas part of its supervisory function.

We use information already held and information from other sources to carry out the moneychecks. launderingYou regulations. Thewill testalso isbe asked a series of checksquestions thatat applyregistration.

We will not register your business if any applicants or BOOMs fail to youpass andthe test or, in the relevantcase responsibleof peopleMSBs, runningwhere yourit business.cannot Itbe formssatisfied partthat ofthe agents or its BOOMs are fit and proper.

We will regularly review our fit and proper decisions, but you only pay for the registrationtest processonce for:per person.

When a new BOOM joins your business, you must:

• moneyamend serviceyour businessesregistration through your Government Gateway account
• trustapply orand companypay servicefor providersthe new BOOM to take the test

Who

The fit and proper test considers a person’s suitability in a given role and therefore that of the business.

An individual may need to undergo the fit and proper test appliesif they move to

a new role or business.

YouIf mustyou includeare responsiblea personsMSB whenthat youuses applyagents to registerprovide your moneyservices, serviceit’s businessyour responsibility to make sure any agents used and their BOOMs would satisfy the fit and proper test. We may request to see evidence of these checks.

An agent is an individual or trust,business appointed to act on behalf of another person or companybusiness service.in the provision of their services.

How HMRC carries out the test

The fit and proper test alsois appliesmade toup agentsof 3 parts.

Part 1

HMRC will test if an applicant or a BOOM has an unspent conviction for a relevant offence. An applicant or a BOOM that has an unspent conviction that is listed in Schedule 3 of moneythe serviceregulations businesseswill automatically fail the fit and theirproper responsibletest.

Part persons.2

We will consider whether there has been a consistent failure to comply with the regulations by the business or the relevant BOOM and whether there is a risk that the business may be used for money laundering or terrorist financing.

TheThis testdoes appliesnot to:mean there needs to be a long history of non-compliance with the regulations. If you have failed to comply with a range of requirements under the regulations, this might also mean you fail the test.

Part 3

We will look more widely at:

• honesty and integrity
• skills and experience
• financial soundness, including tax affairs

Who must apply

When you apply for registration or add new BOOMs after you have registered, you must also apply and pay for a fit and proper test for all the personBOOMs applyingas topart registerof the businessprocess.

BOOMs are:

• theindividuals personwho are running the business,business either on their own or in partnership
• officers of the business,business including director and company secretary
• senior managers who are directly engaged in providingthe provision of regulated activity (see ‘Managers’ section)
• managers who are involved in the development, or monitoring of policies and procedures related to regulated activity (see ‘Managers’ section)
• the nominated officer
• a beneficial ownersowner of the business
• thea person who is ineffectively effect directing the business
• agents

Personnel ofchanges

If moneya servicenew businessesBOOM joins your business after you’ve registered, under the regulations they’ll have to apply and theirpay beneficialfor owners,a officersfit and seniorproper managers

Howtest HMRCwithin carries30 outdays of the test

change.

We’llIf askan forindividual evidencewho ofhas yourpassed honestythe andtest integritymoves from one MSB or TCSP to proveanother, youthey’ll canneed understandto apply and fulfilpay yourfor obligationsa undernew the regulations.test.

To

The reachmeaning of ‘effectively direct’ a decisionbusiness

This we’llterm considerapplies ato rangemoney ofservice informationbusinesses includingor whethertrust youand have:company service providers and means:

• beena convictedperson of,who oris areappointed beingas investigateddirector
• a for,person moneywho launderingis ornot otherappointed offencesas involvinga dishonesty,director fraudbut orstill financialacts crime
• beenas disqualifiedif fromthey actingwere a director, such as a companyperson directorwho:
  • makes decisions about the policies and direction of the business
  • beenis subjectpart toof a confiscationboard, orderor undergroup that makes decisions about the Proceedsbusiness ofdirection
  • makes Crimefinancial Actdecisions 2002on behalf of the business
  • is a tracksignatory recordto ofthe consistentbank non-complianceaccount withfor the moneybusiness
  • decides launderinghow regulations,much credit can be given to customers
  • has significant staff management ― for example you may have overall management of the business or withyou may direct staff on how they do their job
  • appoints and dismisses employees on behalf of the EUbusiness

Managers

The paymentsfit regulationand whichproper test applies to moneythose transmissionpersons servicewho providersmanage the anti-money laundering and counter terrorist financing regime of a business and includes individuals who:

• beenmake disciplineddecisions oraffecting expelledcompliance and are responsible for regulated activities
• are employed by anotherthe supervisorprincipal to oversee or professionalmanage bodythe forscreening regulatoryand orpropriety professionalof failingstheir money service business agents

IfThis youincludes, cannotbut proveis tonot HMRCrestricted thatto, you’rethose amanagers responsibleinvolved personin regarding the riskdevelopment and monitoring of moneyanti-money laundering orand counter terrorist financing,financing you’llpolicies, failcontrols theand test.

Ifprocedures. youThe failtest thealso fitapplies andto properstaff test

who carry out any regulated activity, or where their activity touches on anti-money laundering or counter terrorist financing policies, controls, and procedures.

IfThe you’retest registeringdoes fornot theapply firstto timeother andmanagers thewho nominatedare officenot failsroutinely thisinvolved test,in yourthe applicationanti-money tolaundering registerand willcounter fail.terrorist financing activities of the business.

IfHMRC you’rereserves completingthe yourright annualto supervisioninsist registrationon oradditional addingindividuals being tested where necessary to safeguard a nominatedbusiness officerfrom whomoney failslaundering thisor test,terrorist youfinancing can:risks.

• appoint

  How someoneto elseapply

  You whoshould alreadyapply hasonline for the fit and proper status

• choosetest awhen newyou personregister for anti-money laundering supervision.

  You do not have to apply for the fit and proper test

every year, but you must apply for any new BOOMs that join your business after your registration. You can do this through your Government Gateway account.

Approval

ApprovalThere is a separatefee processfor from the fit and proper test.test.

Once Beforewe anhave individualreceived canyour holdapplication aand positionyou ofhave authoritypaid inthe afee, business,we theywill needcarry approvalout byvarious HMRC.

Whochecks approvalto appliesmake to

sure the information you’ve provided is correct.

HMRC carrieswill carry out approvalthe checksfit whenand theseproper businessestest on new applicants and the BOOMs within its business. This includes any new BOOMs joining a business already on the register forand moneyas launderinga supervision:review of existing fit and proper decisions.

We may also:

• accountancycarry serviceout providersfit and proper tests on your agents and their BOOMs
• estaterequest agenciesadditional information from the business, individuals or both

We will accept:

• lettingoriginal agencydocuments businessesor ‘certified’ copies (you can read more about certifying a document)
• arttranslated marketand participantscertified versions of an overseas equivalent for a non-UK resident

We will check this information against your records, and records kept by:

• highother valueregulatory dealersauthorities
• commercial organisations
• government and law enforcement agencies

After you apply

ApprovalIf iswe similarhave any questions about your application, we will write to you via secure communications on your Government Gateway account to agree a date and time for a telephone call or visit to one of our offices. We will use the email address provided on your application to notify you of this.

We will tell you within 45 days of receiving your application if your business and the BOOMs included in the application in it are fit and properproper. processIf butwe HMRCask makesyou differentto checks.send extra information to assist in determining your application, the deadline for giving you the decision will be extended. If we do not receive a response within 21 days, your application will be refused.

TheHMRC checkswill applycontinue to individualsmonitor whowhether ownyour business, and the BOOMs in your business are fit and proper. We may also check whether your agents and the BOOMs of your agents are fit and proper. You should contact HMRC if, after passing the fit and proper test, any of the BOOMs in your business or holdyour positionsagents or your agents themselves are convicted of authoritya suchrelevant as:offence or anything else happens that may mean we are no longer satisfied they are fit and proper.

• senior

  You managers

• officers
• beneficialcan owners
• solecheck practitioners

if you need to tell someone about your criminal record.

If you fail approval

the fit and proper test

You’llYou will fail approvalthe test if you’veHMRC committedis not satisfied that the applicant or BOOMs are fit and proper, with regard to the checks above. For example, you’ll fail if you have an offenceunspent underconviction Schedulefor 3a relevant offence.

HMRC must refuse your application for registration if one or more of the moneyBOOMs launderingfrom regulations.your business fail the fit and proper test.

If you’rethey registeringfail the test, they must not continue in their duties. HMRC may take civil or criminal action against your business if they do.

You have the right to ask for a review of a decision or to appeal the firstdecision timeto refuse registration. You cannot appeal the decision that you are not a fit and failproper approval,person yourif applicationthe only reason for that decision was that you have an unspent conviction for a relevant offence.

You cannot trade in a regulated sector if HMRC refuses to register willyour fail. Webusiness.

If you do not pay your registration fee, or your fit and proper fee, we will not register your businessbusiness.

You should tell us if you find out that any BOOMs, agents, or BOOMs of agents in your business no longer meet the applicantsrequirements failof approval.the fit and proper test and confirm you have removed them from working in a position that requires them to be fit and proper.

IfAfter you’reregistration, updatingif yourany registrationBOOM detailsis no longer fit and proper and continues in their role, we may cancel or addingsuspend your registration.

Money service businesses with agents

If you are a newMSB nominatedwith officeragents, whoyou failsmust thisbe test,satisfied dependingthat any agents and its BOOMs used to provide your MSB services would satisfy the fit and proper test. HMRC does not normally conduct fit and proper test on the riskagents of moneyMSBs launderingas part of the application process.

Agents do not apply to HMRC for the fit and proper test.

You should carry out a range of enquiries to be sure that your agents and their BOOMs would satisfy the fit and proper test. It’s important that MSB principals take effective steps to prevent individuals who are not fit and proper from becoming or terroristremaining financing,agents or BOOMs.

When HMRC willvisits tellor youcontacts whetheryour business, the officer may ask questions about how you can:check that your agents are fit and proper. You must have policies, controls and procedures in place that include appropriate measures to assess:

• appointwhether someoneyour elseagents who alreadyare hasfit alreadyand been approvedproper
• choosethe arisk newyour personagent tomay applybe used for approvalmoney laundering or terrorist financing

When

You must:

• make sure your agents are aware of any new requirements of the regulations and regularly given training to recognise and deal with transactions related to money laundering or terrorist financing
• keep a record of the training provided
• make sure your policies, controls and procedures contain appropriate measures so you can assess whether your agents and their BOOMs would satisfy the fit and proper test before your application for a fit and approvalproper checkstest takeis place

submitted to HMRC

carry willout useappropriate theenquiries informationto yousatisfy supplyyourself onlinethat whenyour youagents applyBOOMs toare registerfit forand anti-moneyproper launderingand supervisionkeep a record of these assessments to allow us to carry out theour checks.

own checks

There’sYou noshould needalso be able to applyshow forevidence aof:

• checks testyou eachhave year.donee Butand ifwhen athey newwere responsibledone
• any personchecks joinsyou’ve made because of your businessrisk assessment or another reason after you’ve registeredcarried youout the initial check

Assessing whether agents are fit and proper should signinclude measures setting out:

• when or how often the checks should be carried out
• procedures for checking whether the agent or the beneficial owner, officer or senior manager of the agent has a relevant criminal conviction (these can be found in Schedule 3 of the regulations)
• when you will re-check for any relevant criminal convictions
• how you check whether the agent’s business is susceptible to money laundering or terrorist financing ― This may include checks into whether the onlinebusiness serviceis viable
• checking whether the agent has had action taken against them by HMRC previously and addhow theiroften details.this is to occur ― You can check whether we’ve published details of any breaches

HMRC suggests that when checking for unspent convictions listed in Schedule 3 of the regulations, MSB principals should request to see certificates following a basic Disclosure and Barring Service check (DBS).

We will consider accepting other methods of checking a person has no unspent convictions listed in Schedule 3 of the regulations, as long as the results achieved can be shown to be equally robust.

If you’rewe find that you or your BOOMs are not yetfit registeredand online,proper, youor canthe usemeasures formin MLR101place to applyassess forwhether your agents would satisfy the fit and proper test. are not appropriate, we may cancel or suspend your registration.

What

The checksabove happenlist inis not exhaustive, and you should consider how to minimise the risks of persons who are not fit and proper testentering andyour approval

business.

Example

HMRCYou willown checka money service business and employ a director to manage it. You also employ a manager responsible for the accuracyrecruitment in your company. You also have a network of 10 agents.

You apply to register the informationcompany youunder providethe online.regulations. WeBOOMS willwho domust thisalso byapply checkingfor thosea detailsfit againstand informationproper heldtest by:include:

• HMRC
• otheryou regulatoryas authoritiesa beneficial owner
• governmentthe and law enforcement agenciesdirector

We’llYou contactmust youmake ifsure wethe need10 youagents toof sendyour moremoney informationservice orbusiness, documentsas towell confirmas identification.their BOOMs would satisfy the fit and proper test.

IfThe youfit passand theproper test,test HMRCmay willnot continueapply to the manager responsible for recruitment if they do not monitor yourdelivery fitof the policies including staff’s internal compliance and properdelivery or approvedcarry status.out:

Further

• any guidance

supervisory activity that touches on policies

controls and procedures that relate to anti-money laundering or counter terrorist financing

YouIf canthe findmanager moreresponsible informationfor aboutrecruitment also carried out the checksfit thatand HMRCproper makeschecks inon your agents, the guidancetest onwould apply, because their role relates to your anti-money laundering policies, controls and procedures.

Providing false information

Individuals subject to the fit and proper test andare approvalexpected to be fully transparent in their dealings with HMRC. If they’re in any doubt about whether something is relevant or needs to be declared they should contact HMRC. You could be liable to prosecution if you provide false or misleading information.