Providing company services – do you need to register for AML supervision?

If your firm acts as a company secretary or director of a residential management or right to manage company, or you provide the correspondence address for these client companies, you need to consider whether you need to register with HMRC for anti-money laundering supervision.

The UK money laundering regulations require businesses to register for money laundering regulation by HMRC if they offer company services to other companies as part of their business. These include forming companies, acting or arranging for others to act as a director or secretary of a company or “providing a registered office, business address, correspondence or administrative address or other related services for a company, partnership or any other legal person or legal arrangement”.

Property management companies providing these services to client companies should carefully consider whether they need to register, or whether they fall within the exclusion provided by paragraph 15(2) of the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This exclusion covers those who engage in those services on an occasional or very limited basis. The exclusion applies if all of the following conditions are met:

1. The person’s total annual turnover in respect of the financial activity does not exceed £100,000;
   
2. The financial activity is limited in relation to any customer to no more than one transaction exceeding 1,000 euros, whether the transaction is carried out in a single operation, or a series of operations which appear to be linked;
   
3. The financial activity does not exceed 5% of the person’s total annual turnover;
   
4. The financial activity is ancillary and directly related to the person’s main activity;
   
5. The financial activity is not the transmission or remittance of money (or any representation of monetary value) by any means;
   
6. The person’s main activity is not that of a person falling within regulation 8(2)(a) to (f) or (h);
   
7. The financial activity is provided only to customers of the main activity of the person and is not offered to the public.
   

RICS has sought clarification from HMRC which has confirmed that “financial activity” in the exclusion means the specific activity which requires supervision – in this case the provision of company services. In terms of calculating turnover for company services, this will be straightforward where the business charges a separate fee for them.  Where there is no separate fee, HMRC would not automatically attribute the businesses full turnover to “financial activity” for the purposes of the exclusion but would consider the representations made by the business in its particular circumstances to agree what element of turnover is relevant.

We would therefore suggest that RICS firms carefully consider how much of their business constitutes providing company services, how the turnover from those services would be calculated and evidenced and whether all the conditions in the exclusion have been met. Firms may want to consider their agreements with clients and whether these should be amended to provide clarity around the element of fees attributable to company services. If all the conditions of the exclusion are not met, the firm will need to apply for AML registration with HMRC. If firms are not sure whether they need to register, they may need to take legal advice.

Firms are also reminded that they should be carrying out an AML risk assessment of all of their business activities, whether or not they are covered by the Money Laundering Regulations, in order to comply with the RICS Professional Statement: Bribery, Corruption, Money Laundering and Terrorist Financing