Personal reflections on AML by Geoffrey Shindler of Old Trafford Consulting Ltd

 In Tax

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We can all agree, I hope, that money laundering is not to be encouraged and is to be actively discouraged. Criminal sanctions are brought in to deter the money launderers.

The professional community has its own role to play in preventing the growth of money laundering and hopefully assisting in its demise. That may be wishful thinking but we can all hope. The profession needs to be aware of becoming involved to a point where professional individuals can be targeted as criminals because of the nature of the legislation. This piece concludes with a further warning to that effect.

The professional community is now heavily involved in anti-money laundering projects.

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But I wonder firstly how well the relatively new, but continuing, legislation and guidance is helping the process of eliminating money laundering and secondly why do we need legislation that brings in the professionals as opposed to confining itself to those who are the real money launderers and leaving the police to do their job and investigate?

So what has the anti-money laundering legislation produced? A Freedom of Information Act 2000 request has shown that the Trust Registration Service received only 153,241, applications since it began its full operation in June 2017. According to a further comment I have read, a million new and existing express trusts, even those without tax consequences, must be registered by 1 September 2022. The maths show that 170,000 trusts will need to be registered every month between April and 1 September 2022 to meet the deadline. What chance? I think very little.

None of us is enamoured of the anti-money laundering legislation that affects us: our clients certainly do not like it and they like it even less when we point out that there is a fee involved for all the work that the government has imposed on us in respect of anti-money laundering legislation and that fee has to be paid whether or not the trust has any liquid cash with which to pay it.

There is a more fundamental issue to be considered as well. Does HMRC not receive enough information to enable them to ensure that trustees pay the taxes that are due from them? Trustees have to complete an annual tax return which should contain full details of their income, their capital gains and details of distributions to beneficiaries. Why did they need any more information?

And why do they need information about trusts which have neither income nor capital gain nor an asset which produces either?

So if HMRC receive all they need to know on an annual basis from the compliant trustee taxpayers, what is the purpose of the Trust Registration Service? Is it actually a branch of the law enforcement organisation? My view is it is just that. And it follows that the professionals are unpaid policemen with criminal sanctions imposed upon them if they do not perform their statutory role. So is it fair? Are the police subject to sanctions if they do not do their statutory duties to the satisfaction of ….. who exactly? This is a who guards the guardians issue.

None of this suggests that money laundering ought to be exempt from legislation – my concern is that what is being heaped upon professionals is yet another level of compliance and bureaucracy and I have grave doubts as to whether the information that is demanded of us is worth the effort.

I suppose one argument that HMRC might put forward is that, although some trusts have neither income nor capital gains nor make distributions, it is “helpful” for HMRC to see who are beneficiaries of trusts so that they can ensure that those people pay their proper share of their taxes. I remain one of the sceptics. If trustees have to disclose minor beneficiaries who receive nothing how does it help them or the anti-money laundering world? I have yet to see anywhere a justification of the present money laundering regulations which are now in their 5th/6th issue. In my view the bureaucracy is out of control.

No one wants to be prosecuted either for speeding or for money laundering but does the whole panoply of anti-money laundering legislation deter money launderers or assist the state in ensuring that what should happen does happen and what needs to be collected by way of tax is collected?

My view is that the anti-money laundering legislation should not impact professionals trying to deal with a substantive part of their job and the professionals should not be required to act as gatekeepers for HMRC nor act as proxies for the police force.

The original version of this article was published in the Trusts and Estates Law & Tax Journal (June 2022) and is available on lawjournals.co.uk.

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