UK: New Money Laundering Regime Introduces Additional Compliance Duties For Pension Scheme Trustees

Last Updated: 25 July 2017
Article by Jason Coates

New money laundering requirements came into effect on 26 June 2017 which impose new compliance obligations on trustees of occupational pension schemes. There are three key duties which centre on record-keeping, the provision of information to third parties in certain circumstances and submitting information to HM Revenue & Customs (HMRC) for purposes of its register of beneficial ownership.

Key Points

  1. New money laundering regulations are in force
    New money laundering requirements came into effect on 26 June 2017 (the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) (MLR 2017). They replace the Money Laundering Regulations SI 2007/2157.
  2. Implements EU Directive
    The new regulations implement the Fourth Money Laundering Directive (EU) 2015/849.
  3. New compliance duties on pension scheme trustees
    The new money laundering requirements impose new compliance duties on trustees of occupational pension schemes as regards record-keeping, the provision of information to certain third parties and reporting to HMRC. While for some schemes, the practical impact may be very small, others (depending on how their assets are invested) could find themselves with onerous obligations unless HMRC is prepared to issue guidance confirming more practical requirements for pension schemes.

Background

The new money laundering requirements implement the Fourth Money Laundering Directive (EU) 2015/849.

Under the previous 2007 money laundering regime, trustees of occupational pension schemes, (including professional trustees who act only in relation to occupational pension schemes), were not required to register with HMRC for money laundering purposes or to take related compliance actions. HMRC's position in this regard under the new regulations is unchanged (as set out in its recently updated guidance).

However, pension schemes trustees may find themselves subject to new duties under the MLR 2017 because of the inclusion of provisions applying to "relevant trusts" which, as defined in the regulations, includes occupational pension schemes.

New money laundering duties

Duty 1: to keep accurate and up-to-date records

Trustees are obliged to maintain accurate and up-to-date written records of all "beneficial owners" of the trust. Beneficial owners include the trustees of the trust, its beneficiaries and the settlor. In practice, the type of information that trustees will need to hold will include:

  • in relation to beneficiaries: their name, national insurance (NI) number or unique taxpayer reference number (or failing those the individual's usual residential address), date of birth and the individual's role in relation to the trust. (Additional information as regards passport or ID details must be held where an individual does not have a NI or taxpayer reference number and the trustees instead hold an address for the individual which is not in the UK);
  • the full name of all advisers who are paid to provide legal, financial or tax advice to the trustees in relation to the trust; and
  • a contact address for the trustees.

Trustees should hold much of the required information in any event, but will still need to make some checks to ensure they are complying with these requirements, in particular if for any reason a member does not have an NI number or tax payment reference and is based overseas. Trustees should speak to their administrators to check the position.

Duty 2: to disclose beneficial ownership information to third parties

Where pension scheme trustees, on behalf of the trust, enter into a relevant transaction or form a business relationship with a "relevant person" they must:

  • inform that person that they are acting as a trustee (this will usually be happening already); and
  • on request, provide information about the beneficial owners of the trust, to that person. Helpfully, in these circumstances, this is a more limited disclosure obligation which is satisfied by providing a generic description of the class of persons who are beneficiaries of the trust (or potential beneficiaries), rather than having to disclose specific details about individual beneficiaries.

Further, if this information is requested and provided, there is a duty on trustees while the business relationship endures to update the relevant person of any subsequent changes within 14 days of becoming aware of the change.

For this purpose, a "relevant person" includes a credit institution, financial institution, auditor, external accountant, tax adviser or lawyer who are not exempt from the requirements to carry out due diligence checks in relation to money laundering and undertake other money laundering compliance actions.

Also, where it is requested, more detailed beneficial ownership information must be provided to specified law enforcement authorities, including the Serious Fraud Office, the Financial Conduct Authority, the National Crime Agency and the various UK police services, within a timeframe specified by that authority (which must be reasonable).

Trustees do not need to take any action as regards this requirement, other than to be aware that they must comply with such requests for information if made.

Duty 3: Provision of trust and beneficial ownership information to HMRC

In addition, there is a requirement to provide information about the trust and also its beneficial owners to HMRC in relation to any tax year in which the assets or income of the trust are liable to any of the following taxes:

  • income tax;
  • capital gains tax;
  • inheritance tax;
  • stamp duty land tax;
  • stamp duty reserve tax; and
  • land and buildings transaction tax.

We would not normally expect assets or income of an occupational pension scheme to be subject to income tax, inheritance tax or capital gains tax. However, pension schemes are likely to be caught by stamp duty land tax or stamp duty reserve tax if they invest directly in shares or property including by way of a discretionary investment management agreement with a fund manager. Such charges should not be incurred if investments are made through a pooled fund product or similar product on the basis that we would expect the fund operator to be responsible for those tax charges. In order to assess whether this duty to report to HMRC applies, trustees will need to be clear about how their scheme's investments are actually managed and whether that gives rise to any of the stipulated tax charges, and they should speak to their investment consultants/managers about this.

Where applicable, the information must be provided initially by 31 January 2018 or a subsequent 31 January after the tax year in which the pension scheme assets or income were first subject to any of the stipulated tax charges. Thereafter, trustees must update the information or confirm to HMRC that it has not changed by 31 January after any tax year in which they were liable to pay any of the stipulated taxes.

The type of information that will need to be submitted to HMRC will include:

  • in relation to the trust: the details of those who provide legal, tax and financial advice to the trustees in relation to the trust and a statement of accounts for the trust describing the trust assets and identifying the value of each category of the trust assets as at the date on which this information is first provided to HMRC; and
  • in relation to beneficiaries, (being part of the beneficial owners group), the detailed information described under duty 1.

This is potentially a very onerous obligation (and we would suggest impractical and disproportionate for registered pension schemes) involving trustees having to submit considerable amounts of information in respect of a large number of members to HMRC. We understand that various industry bodies continue to discuss this with HMRC and have raised concerns.

We expect that HMRC will issue guidance to the pensions industry on how it intends these requirements will work in practice. This is to be welcomed as there are areas of uncertainty in the regulations around the extent of the disclosure obligation (amongst other things) on which clarity is required. HMRC has indicated that it will be taking a pragmatic approach in order to minimise the burden placed on the pensions industry by this new requirement. We are monitoring this and will update clients accordingly. We hope that a more pragmatic position will be reached with HMRC well before the first reporting date of 31 January 2018.

Next steps - what should trustees do now?

Trustees need to be aware of these new obligations. Whilst we would expect schemes to hold most of the information referred to in the section on duty 1, trustees may want to contact their administrators to check that they do actually have all of that information in practice.

By far the most onerous obligation is the requirement to provide beneficial ownership and trust information to HMRC. Whilst we are waiting for HMRC to clarify its requirements in this regard in guidance, trustees may wish to start considering whether the assets and income of their scheme are subject to any of the stipulated tax charges. In practice, this will most likely depend on how the scheme makes investments and we suggest that trustees may want to raise this with their investment consultants/managers as a first step.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Sep 2017, Seminar, Birmingham, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

18 Sep 2017, Seminar, London, UK

Our annual event as part of the London Design Festival is now in its fifth year. We would be delighted if you are able to join us again.

21 Sep 2017, Seminar, London, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.