The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020

Made: 14th September 2020

Laid before Parliament: 15th September 2020

Coming into force in accordance with regulation 1

The requirements of paragraph 3(2) of Schedule 7 to the European Union (Withdrawal) Act 2018 (relating to the appropriate Parliamentary procedure for these Regulations) have been satisfied.

PART 1 — Introduction

Citation and commencement

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• (1) These Regulations may be cited as the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.

• (2) Parts 1 to 3 come into force 21 days after the day on which they are laid, except as specified in paragraphs (3) and (4).

• (3) Regulation 7(2)(a) (substitution of paragraph (3) of regulation 45: register of beneficial ownership information) comes into force on 6th April 2021.

• (4) Regulation 5 (substitution of regulation 30A: reporting discrepancies: trusts) and regulation 7(4) (insertion of new regulation 45ZB: access to information on the register) come into force on 1st September 2022.

• (5) Part 4 comes into force on IP completion day.

PART 2 — Implementation of EU law

Amendment of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

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The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017[^f00004] are amended in accordance with regulations 3 to 12.

Customer due diligence measures

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In regulation 28 (customer due diligence measures)[^f00005]—

• (a) in paragraph (5), after “Paragraphs (3)(b)” insert “, (3A)”;

• (b) in paragraph (19)(b), for the words “an appropriate level of assurance” to the end, substitute “assurance that the person claiming a particular identity is in fact the person with that identity, to a degree that is necessary for effectively managing and mitigating any risks of money laundering and terrorist financing”.

Reporting discrepancies: general

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• (1) In regulation 30A(2)(b) (requirement to report discrepancies in registers)[^f00006], after “carrying out its duties under these Regulations” insert “when establishing a business relationship with the customer”.

• (2) In regulation 37(2)(a) (simplified due diligence)—

• (a) for “regulation 28” substitute “regulations 28 and 30A”;

• (b) for “that regulation” substitute “regulation 28”.

• (3) In regulation 39 (reliance)—

• (a) in paragraph (1), after “regulation 28(2) to (6) and (10)” insert “, or to carry out any of the measures required by regulation 30A,”;

• (b) in paragraph (2)—

• (i) after “apply customer due diligence measures” insert “or carry out any of the measures required by regulation 30A”;

• (ii) in sub-paragraph (a), after “regulation 28(2) to (6) and (10)” insert “and regulation 30A”;

• (c) in paragraph (7), after “applying customer due diligence measures” insert “, or carrying out any of the measures required by regulation 30A,”.

• (4) In regulation 40(2)(a) (record keeping), after “regulations 28, 29 and 33 to 37” insert “and the requirements of regulation 30A”.

Reporting discrepancies: trusts

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For regulation 30A (requirement to report discrepancies in registers) substitute—

(30A) (1) Before establishing a business relationship with— (a) a company which is subject to the requirements of Part 21A of the Companies Act 2006 (information about people with significant control)[^f00007]; (b) an unregistered company which is subject to the requirements of the Unregistered Companies Regulations 2009[^f00008]; (c) a limited liability partnership which is subject to the requirements of the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009[^f00009]; (d) an eligible Scottish partnership which is subject to the requirements of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017[^f00010], or (e) a trust which is subject to registration under Part 5 of these Regulations, a relevant person must collect proof of registration or an excerpt of the register from the company, the unregistered company, the limited liability partnership or the trust (as the case may be) or from the registrar (in the case of an eligible Scottish partnership). (2) The relevant person must report to the person mentioned in paragraph (3) any discrepancy the relevant person finds between information relating to the beneficial ownership of the customer— (a) which the relevant person collects under paragraph (1), and (b) which otherwise becomes available to the relevant person in the course of carrying out its duties under these Regulations when establishing a business relationship with the customer. (3) The discrepancy must be reported— (a) if it relates to a company, an unregistered company, a limited liability partnership or an eligible Scottish partnership, to the registrar; or (b) if it relates to a trust, to the Commissioners. (4) The relevant person is not required under paragraph (2) to report information which that person would be entitled to refuse to provide on grounds of legal professional privilege in the High Court (or in Scotland, on the ground of confidentiality of communications in the Court of Session). (5) The person to whom the discrepancy is reported must take such action as that person considers appropriate to investigate and, if necessary, resolve the discrepancy in a timely manner. (6) A discrepancy which is reported to the registrar under paragraph (3) is material excluded from public inspection for the purposes of section 1087 of the Companies Act 2006 (material not available for public inspection), including for the purposes of that section as applied— (a) to unregistered companies by paragraph 20 of Schedule 1 to the Unregistered Companies Regulations 2009; (b) to limited liability partnerships by regulation 66 of the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009; and (c) to eligible Scottish partnerships by regulation 61 of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017. (7) A reference to the registrar in this regulation is to the registrar of companies within the meaning of section 1060(3) of the Companies Act 2006.

Enhanced due diligence

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• (1) In regulation 33 (obligation to apply enhanced customer due diligence)[^f00011], for paragraph (4A) substitute—

(4A) Where a relevant person provides a life insurance policy, the relevant person must consider the nature and identity of the beneficiary of the policy when assessing whether there is a high risk of money laundering or terrorist financing, and the extent of the measures which should be taken to manage and mitigate that risk. (4B) Where the beneficiary of a life insurance policy provided by a relevant person— (a) is a legal person or a legal arrangement, and (b) presents a high risk of money laundering or terrorist financing, the relevant person must take reasonable measures to identify and verify the identity of the beneficial owner of that beneficiary before any payment is made under the policy.

• (2) In regulation 34(1) (enhanced due diligence: credit institutions, financial institutions and correspondent relationships), after “correspondent relationship” insert “involving the execution of payments”.

Beneficial ownership information

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• (1) In regulation 42 (application of Part 5)—

• (a) in paragraph (2)—

• (i) at the end of sub-paragraph (b)(i), omit “or”;

• (ii) after “one or more of the taxes referred to in regulation 45(14);”, insert—

or (iii) any other non-UK trust which is an express trust, is not a trust listed in Schedule 3A (excluded trusts) and whose trustees (in their capacity as such)— (aa) acquire an interest in land in the United Kingdom; or (bb) enter into a business relationship with a relevant person, where at least one of those trustees is resident in the United Kingdom and the trust is not an EEA registered trust;

• (b) after paragraph (3), insert—

(4) For the purposes of this Part, an “EEA registered trust” is a trust whose beneficial ownership information is required, by Article 31.3a of the fourth money laundering directive, to be held in a central register set up by an EEA state other than the United Kingdom. (5) For the purposes of this Part, the trustees acquire an interest in land in the United Kingdom where at least one of the trustees becomes registered— (a) in the register of title kept under the Land Registration Act 2002[^f00012] as the proprietor of— (i) a freehold estate in land; or (ii) a leasehold estate in land granted for a term of more than 7 years from the date of the grant; (b) in the Land Register of Scotland as the proprietor or as the tenant under a lease (“lease” and “proprietor” having the meanings given by section 113(1) of the Land Registration etc. (Scotland) Act 2012[^f00013]); or (c) in the register kept under the Land Registration Act (Northern Ireland) 1970[^f00014] as the owner of— (i) a freehold estate in land; or (ii) a leasehold estate in land granted for a term of more than 21 years from the date of the grant. (6) For the purposes of this Part— (a) the trustees have a controlling interest in a third country entity if they meet any of the specified conditions in paragraphs 2 to 5 of Schedule 1A to the Companies Act 2006 (people with significant control over a company)[^f00015] where that Schedule is read with the following modifications— (i) references to X having or holding a share in or a right in relation to, or exercising significant influence or control over, company Y are to be read as references to the trustees (in their capacity as such) having or holding a share in or a right in relation to, or exercising significant influence or control over, the third country entity; (ii) for “25%” wherever it occurs in each of paragraphs 2 (ownership of shares), 3 (voting rights), 13 (calculating shareholdings), and 14 (voting rights), read “50%”; and (b) “third country entity” means a body corporate, partnership or other entity that is governed by the law of a country or territory outside the EEA and (in each case) is a legal person under that law.

• (2) In regulation 45 (register of beneficial ownership)[^f00016]—

• (a) for paragraph (3) substitute—

(3) The information required under paragraph (2) must, apart from any information already provided to the Commissioners under regulation 45ZA (at a time when the trust was not a taxable relevant trust), be provided— (a) on or before 31st January after the tax year in which the trustees were first liable to pay any of the taxes referred to in paragraph (14) (“UK taxes”), in the case of a trust which is set up before 6th April 2021; (b) on or before 10th March 2022, in the case of a trust which is set up after 5th April 2021 where the trustees become liable to pay UK taxes before 9th February 2022; (c) within 30 days of the trustees becoming liable to pay UK taxes, in any other case.

• (b) in paragraph (4), for “paragraph (2)” substitute “paragraphs (2) and (9)”;

• (c) for paragraph (10) substitute—

(10) The register must contain the information referred to in— (a) regulation 44(2)(b) and (5)(b), in relation to taxable relevant trusts; (b) regulation 44(2)(b) and (5)(b) and paragraphs (10E) to (10G), in relation to the types of taxable relevant trust mentioned in paragraphs (10A) to (10C); (c) regulation 45ZA(3) and (4), in relation to the types of trust mentioned in regulation 45ZA(1).

• (d) after paragraph (10) insert—

(10A) The trustees of a taxable relevant trust which is a UK trust, and is not an EEA registered trust or a trust listed in Schedule 3A, must provide the Commissioners with the information specified in paragraph (10E), apart from any information already provided to the Commissioners under regulation 45ZA (at a time when the trust was not a taxable relevant trust)— (a) on or before 10th March 2022, where the trustees become liable to pay UK taxes before 9th February 2022; (b) within 30 days of the trustees becoming liable to pay UK taxes, in any other case. (10B) This paragraph applies to the trustees of a taxable relevant trust which is a non-UK trust, has at least one trustee resident in the United Kingdom and is not an EEA registered trust or a trust falling within Schedule 3A, where the trustees of that trust, in their capacity as such— (a) enter into a business relationship with a relevant person; or (b) acquire an interest in land in the United Kingdom. (10C) This paragraph applies to the trustees of a taxable relevant trust which is a non-UK trust and is not a trust listed in Schedule 3A, where none of the trustees are resident in the United Kingdom and those trustees, in their capacity as such, acquire an interest in land in the United Kingdom. (10D) Where paragraph (10B) or (10C) applies, the trustees must provide the Commissioners with the information specified in paragraph (10E), apart from any information already provided to the Commissioners under regulation 45ZA (at a time when the trust was not a taxable relevant trust)— (a) on or before 10th March 2022, where the trustees become liable to pay UK taxes before 9th February 2022; (b) otherwise, within 30 days of the trustees acquiring the land or (where paragraph (10B)(a) applies) entering into the business relationship. (10E) The trustees must provide the Commissioners with the following information in relation to each of the beneficial owners of the trust who is an individual, and in relation to any other individual referred to as a potential beneficiary in a document from the settlor relating to the trust such as a letter of wishes— (a) the individual’s country of residence; (b) the individual’s nationality; (c) the nature and extent of the individual’s beneficial interest, but if paragraph (10F) applies, this information does not need to be provided in relation to the beneficiaries of the trust. (10F) Where the beneficial owners include a class of beneficiaries, not all of whom have been determined, the information to be provided under paragraph (10E) is a description of the class of persons who are beneficiaries or potential beneficiaries under the trust. (10G) The trustees of a trust to which paragraph (10A) or (10B) applies must— (a) if they have a controlling interest in a third country entity, provide the Commissioners with the following information, apart from any information already provided under regulation 45ZA(4), at the same time as providing the information under paragraph (10E)— (i) the third country entity’s corporate or firm name; (ii) the country or territory by whose law the third country entity is governed; (iii) the registered or principal office of the third country entity; (b) if they acquire an interest in a third country entity after providing the information under paragraph (10E), provide the Commissioners with the information specified in this paragraph within 30 days of the date on which they acquired that interest. (10H) The trustees of a taxable relevant trust to which paragraph (10A), (10B) or (10C) applies must, if the trustee becomes aware that any of the information provided to the Commissioners under paragraphs (10E) to (10G) has changed, notify the Commissioners of the change and the date on which it occurred within 30 days of the trustee becoming aware of the change. (10I) The information required under paragraphs (10E) to (10H) must be provided in such form as the Commissioners reasonably require. (10J) The Commissioners must keep the information referred to in paragraph (10) on the register for at least five years, and no more than 10 years, after the trust to which it relates has ceased to exist or has ceased to be a type of trust referred to in paragraph (10).

• (e) in paragraph (13), after “regulation 44(2)(b) and (5)(b)” insert “, paragraphs (10E) to (10G) and regulation 45ZA(3) and (4)”.

• (3) In Part 5, after regulation 45 insert—