With only nine months to go until the latest EU anti-money laundering reforms must be bedded into UK law, the government is consulting on requirements including a new ‘fit and proper persons test’ for lawyers.
EU member states, including the UK, have until June next year to implement the fourth money laundering directive. HM Treasury is now seeking views and evidence to help inform government on ‘transposition’ of the directive into national law.
The directive requires supervisors to ensure that individuals who hold a management function within certain entities, or are the beneficial owners of such entities, are ‘fit and proper persons’, or in other sectors that the person or their associates do not hold a criminal conviction.
Independent legal professionals participating in any financial or real estate transaction, or assisting in the planning or carying out of transactions for the client concerning, for instance, the management of client money, will be brought into the scope of those who are subject to a fit and proper persons test.
The consultation document states: ‘Supervisors must take the necessary measures to prevent criminals convicted in relevant areas or their associates from holding a management function in, or being the beneficial owners of these obliged entities.’
The government has interpreted such convictions to include perverting the course of justice, bribery, fraud and serious criminal justice offences.
Once introduced, the criminality test will apply to existing registered businesses. The government proposes introducing a two-year transition period for criminality tests to be conducted on those affected by the directive.
Documents necessary to comply with customer due diligence requirements will need to be retained for five years after the end of a business relationship or occasional transaction.
Supporting evidence and records of transactions, consisting of the original documents or copies admissible in judicial proceedings, which are necessary to identify transactions, will also need to be kept for an additional five years.
HM Treasury is also seeking evidence-based responses to actions that might be taken to mitigate money laundering and terrorist-financing risks in relation to pooled client accounts.
The consultation paper notes that the fourth directive no longer contains an express provision allowing ‘simplified’ due diligence for pooled client accounts.
As the Gazette previously reported, the directive will, for the first time, oblige EU member states to keep central registers of information on the ultimate beneficial owners of corporate and other legal entities, as well as trusts. Lawyers will need to be more vigilant about suspicious transactions made by their clients.
The definition of politically exposed persons will be widened for carrying out enhanced due diligence.
The consultation closes on 10 November.