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
19 Sep 2019, Seminar, Birmingham, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

26 Sep 2019, Seminar, London, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

8 Oct 2019, Seminar, Birmingham, UK

Supporting the development of paralegals, trainees and lawyers of up to five years' PQE by providing valuable knowledge and guidance together with practical tips.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions