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Money laundering supervision: business inspections

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From: HM Revenue & Customs

Why HMRC might check the compliance of your business and what to expect if they do.

Contents

  1. Overview
  2. Why HMRC visits businesses
  3. How HMRC will contact you to arrange a visit
  4. Who the officer will want to talk to during the visit
  5. What the officer will do during the visit
  6. Records the officer will want to see
  7. At the end of the visit
  8. Office based compliance checks
  9. After a compliance check

Overview

HM Revenue and Customs (HMRC) may check the compliance of your business using visits or office based compliance if it’s registered under the Money Laundering Regulations.

The purpose of a compliance check is to see that you’re complying with the regulations.

HMRC will look at how you operate your anti-money laundering policies and procedures and help you make sure you’ve put the right systems in place.

This guide explains what to expect if HMRC contacts you to arrange a check, so that you know:

  • who should be present
  • what the officer will focus on
  • which records they’ll want to see

Why HMRC visits businesses

HMRC makes sure that businesses registered with it are complying with the Money Laundering Regulations.

An officer may visit your business if information suggests there is a risk that your business may be exposed to money laundering. If HMRC does decide to visit your business this may not mean they think there’s something wrong.

When HMRC officers visit your business they’ll make sure you understand the regulations. It’s a good opportunity to ask about anything you’re unsure of.

They’ll look at your anti-money laundering risk assessment, policies, controls and procedures to check that you’re only doing what’s really necessary, and check you know about any simplified procedures you could take advantage of.

How HMRC will contact you to arrange a visit

If HMRC decides to visit your business they’ll generally contact you by phone to arrange a convenient time.

The officer will normally visit your main business premises so they can:

  • see how your anti-money laundering risk assessment, policies, controls and procedures work
  • have access to all the records and paperwork relating to your procedures
  • speak to the right people

You should let HMRC know if you want the visit to take place at a different business premises.

HMRC will write to you and confirm:

  • the date and time of the visit
  • who the officer will want to speak to
  • the information the officer will want you to give them
  • the records and documents the officer will want to see

HMRC will usually let you know in advance the names and contact numbers of the officer.

Exceptionally, HMRC may visit a business without making an appointment. If they do, the officer will:

  • identify themselves
  • give a reason for the unannounced visit

Who the officer will want to talk to during the visit

When the officer arrives at your business premises they’ll need to talk to the owner of the business.

After that, as the owner of the business you don’t need to be there so long as a responsible person is present who can:

  • answer the officer’s questions
  • give the officer any documents or information they need

Your manager (or the person in the business who’s responsible for complying with the regulations if that’s someone else) should always be there during the visit.

The officer will look at your risk assessment, policies, controls and procedures and test them to make sure they’re working properly.

They’ll need to speak to you as the business owner, your senior managers and sometimes other members of staff to make sure you all understand the policies and procedures and have applied them in your business.

Professional advisers

You can ask a professional adviser to be there during the visit but they can’t stand in for you. Only you can answer the officer’s questions about your business.

Your adviser may be able to explain things better or make things clearer, especially if they were involved with setting up your anti-money laundering policies and procedures or with staff training, but they may charge you for this.

What the officer will do during the visit

When the officer arrives at your premises they’ll identify themselves and show you their identity card.

They’ll focus on your anti-money laundering risk assessment, policies, controls and procedures to make sure these are working effectively to identify and reduce the money laundering risks your business might face.

The officer will always:

  • check that the information on the HMRC register is correct
  • check that the right people have taken the fit and proper test if your business is a money service business or a trust or company service provider
  • check the right people have approval from HMRC if your business is an accountancy servicer provider, estate agency business or a high value dealer
  • look at the risk assessment of your customers, products and services
  • look at the policies, controls, procedures and training you’ve put in place to manage and reduce the risks you’ve identified
  • ask you to explain how your anti-money laundering risk assessment, policies, controls and procedures work

They’ll also answer any questions you might have about your legal responsibilities under anti-money laundering legislation.

The officer may also carry out some of the following checks:

  • examine your records of transactions
  • check your customer due diligence procedures
  • see how effective your systems are for identifying and reporting suspicious activity to the National Crime Agency (NCA)
  • check that your staff know about anti-money laundering legislation and that they’re trained to recognise and deal with suspicious activity
  • make sure you’ve got the right systems in place

The officer may inspect any cash they find on your premises if you’re a high value dealer or a money service business.

They’ll check that your anti-money laundering risk assessment, policies, controls and procedures cover pawnbroking if you offer this as part of your money service business.

Records the officer will want to see

In addition to other checks, the visiting officer might ask to see:

  • internal audits of how you’ve complied with internal anti-money laundering procedures and controls
  • an external auditor’s report, if this covers your business’s compliance with the regulations
  • relevant bank statements
  • copies of and references to material proving a customer’s identity
  • training records
  • a job description of the senior manager in your business who is responsible for complying with anti-money laundering legislation
  • records of suspicious transactions and of the action you took
  • copies of any Suspicious Activity Reports you submitted to the NCA, and any correspondence from the NCA concerning consent to proceed

The officer will only look at Suspicious Activity Reports for anti-money laundering legislation purposes. They won’t look at them for tax purposes.

At the end of the visit

HMRC aims to carry out their visit as quickly as possible. Unless you’re a large or complex business it’ll usually take less than a day.

At the end of the visit the officer will:

  • review with you what they’ve done
  • explain any areas of concern
  • agree with you any action you need to take
  • answer any questions you have

After the visit

After the visit HMRC may send you notes of the meeting. This is an opportunity for you to make any amendments and send them back within the deadline.

The interval between visits

The length of time before HMRC visits your business again varies. It depends on:

  • the size of your business and how complex it is
  • what type of customers you have
  • your previous record of complying with the regulations

Office based compliance checks

HMRC may decide to conduct office based compliance checks such as a telephone or desk based check. If they decide to do this they’ll contact you by post or telephone to arrange a time and date. They will request the same information and records as when carrying out a visit.

The purpose of an office based check is the same as a visit and similar checks may be carried out. Our officers will make sure they are speaking to a responsible individual within the business such as the business owner or senior manager.

In many cases an office based check will be enough to test the compliance of your business. However, HMRC may need to use other types of checks to follow up if your business is complex or there are concerns that need further investigation (for example, a telephone check to complete visit or a visit following a telephone check).

After a compliance check

HMRC will write to you to:

  • set out any action you need to take
  • warn you if you may be liable to pay a penalty or other sanction (although businesses that follow the HMRC guidance won’t be liable to a penalty and will have protection from prosecution)

They’ll give you a reasonable amount of time to let them have any information they need, and to put right any problems.