ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Implementing the fifth Anti Money Laundering Directive: Insolvency

  • LinkedIn (opens new window)
  • Twitter (opens new window)
Steven Wood By Steven Wood, Practice Support Specialist (Insolvency)

16 March 2020

Key points:

  • Changes to the 2017 AML Regulations became effective on 10 January 2020.
  • Consideration of PSC reporting in an insolvency context.
  • New requirements surrounding training of agents.

Legislation to amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the 2017 AML Regulations) became effective on 10 January 2020. An earlier article by David Menzies details the key areas affecting accountancy firms.

Many of the changes under 5AMLD will not impact insolvency practitioners greatly as they deal with 5AMLD’s scope expansion. However, some of the main changes are considered below.

PSC Reporting

An earlier article looked in more detail at the requirement for firms taking on a client to check that client has filed details of people with significant control (PSC) with the registrar (i.e. Companies House) and to report any discrepancies identified. The earlier article should be referred to for a detailed explanation of the requirements introduced by new regulation 30A to the 2017 AML Regulations.
In an insolvency situation there is clearly an argument that reporting discrepancies is a futile exercise in view of the ultimate dissolution of the company, making any errors identified inconsequential.
If considered solely on the basis that the purpose of the new requirement is to rectify honest reporting errors, then that point is valid. However, one of the underlying reasons for the enhanced reporting requirements is to flag criminal activity whereby the real owners and controllers of the company are exposed. This allows easy triaging of data by Companies House, and useful reporting to relevant law enforcement agencies as appropriate.
As there may be criminal intent behind disguised PSCs, which will only be exposed once reported, it is understandable that there is no ‘carve-out’ of this provision for insolvency practitioners. If one were to be made, then insolvency could be a route for individuals with criminal intent to avoid detection.
As noted in the earlier article, a discrepancy report is not a substitute for a Suspicious Activity Report (SAR). The requirement to submit a SAR where appropriate continues.

Widening of the net

Regulation 8(2) the 2017 AML Regulations is amended to bring new categories of “relevant person” into scope. The new businesses covered by the legislation are letting agents, art market participants (including operators of freeports), and providers of exchange or storage services for “cryptoassets” such as virtual currencies. Insolvency Practitioners need to be aware of these changes in case of appointment over one of these newly regulated entities.

Tax adviser

The definition of tax adviser is extended to those who provide material aid or assistance on tax. Regulation 11(d) of the 2017 AML Regulations now states “’tax adviser’ means a firm or sole practitioner who by way of business provides material aid, or assistance or advice, in connection with the tax affairs of other persons, whether provided directly or through a third party, when providing such services”.

While there is no direct impact on insolvency practitioners resulting from this change, there may be some questions about whether assisting a company or an individual with a time to pay arrangement for HMRC or similar means that you fall within the remit of “tax adviser”.

It is likely that such activities would have fallen within the former definition of ‘tax adviser’. As such Customer Due Diligence (CDD) should always have been undertaken in relation to such assignments.

The former definition of ‘tax adviser’ was “a firm or sole practitioner who by way of business provides advice about the tax affairs of other persons, when providing such services”. The meaning of ‘advice’ was widely interpreted and assisting with the negotiation and agreement of a time to pay arrangement would certainly appear to have fallen within its term.

Training

Regulation 24(1) (training) of the 2017 AML Regulations is amended to widen the scope of “relevant employees” to include “any agents it uses for the purposes of its business whose work is of a kind mentioned in paragraph (2)”.

Paragraph (2) defines a relevant employee as an employee whose work is—

(a) relevant to the relevant person’s compliance with any requirement in these Regulations, or

(b) otherwise capable of contributing to the—

(i) identification or mitigation of the risk of money laundering and terrorist financing to which the relevant person’s business is subject; or

(ii) prevention or detection of money.

The result is that firms must now ensure that any agents to whom this definition applies are aware of the law relating to money laundering and terrorist financing, and to the requirements of data protection, and are regularly given training in how to recognise and deal with transactions and other activities or situations which may be related to money laundering or terrorist financing.

In an insolvency context, this expanded definition of “relevant employees” has the potential to have significant repercussions given the nature of the work covered by insolvency practitioners and the need to engage agents/third party services to deal with aspects of an insolvency case.

Regulation 24 requires firms to take appropriate measures to ensure that its relevant employees are:

(i) made aware of the law relating to money laundering and terrorist financing, and to the requirements of data protection, which are relevant to the implementation of these Regulations; and

(ii) regularly given training in how to recognise and deal with transactions and other activities or situations which may be related to money laundering or terrorist financing;

The firm is also required to maintain a record in writing of the measures taken under (i) and (ii), and, of the training given.
It is unclear at this stage the extent to which firms will require to go to comply with this requirement for agents. For example, is it acceptable to rely on an agent’s own training systems? Will copies of their training records be required? Can the onus to comply be contractually placed on to the agent, or do responsibilities extend further than this? We are seeking clarification on such matters and expect that further guidance will be available in the updated Anti Money Laundering Guidance for the Accountancy Sector which is being developed.

IPs should bear in mind that, per the CCAB’s draft guidance, when appointed as a liquidator, administrator, administrative or other receiver, or supervisor of an IVA or CVA, the assets do not vest and an IP’s business relationship is with the debtor or the entity over which they have been appointed, not with the purchasers of their assets. Where an IP is appointed over an unregulated entity, the nature of the business of the debtor or entity does not change with the appointment of an IP, therefore, if the insolvent entity was not within the regulated sector prior to the appointment, it would not become a regulated entity simply by virtue of an IP being appointed.

Enhanced due diligence

5MLD extends Regulation 33 pf the 2017 Regulations to prescribe six enhanced due diligence measures that must be taken when undertaking a relevant transaction (as defined by Regulation 27). where either of the parties to the transaction is established in a high-risk third country.

The measures are:

  • obtaining additional information on the customer and on the customer’s beneficial owner;
  • obtaining additional information on the intended nature of the business relationship;
  • obtaining information on the source of funds and source of wealth of the customer and of the customer’s beneficial owner;
  • obtaining information on the reasons for the transactions;
  • obtaining the approval of senior management for establishing or continuing the business relationship; and
  • conducting enhanced monitoring of the business relationship by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

The final measure is unlikely to apply in an insolvency situation unless the IP is trading or monitoring trade.

Summary

AML compliance is quite often viewed as an administrative job that is not a priority. Given the change in regulatory landscape, AML needs to be prioritised, with sufficient time and resources allocated to it.

Regulation 28 of the 2017 AML Regulations is amended to acknowledge that electronic ID verification can be considered a reliable source of evidence, where the electronic process is free from fraud and provides sufficient assurance of the identity of the individual. ICAS has a strategic partnership with Amiqus ID which provides electronic AML services that aid compliance with AML requirements and reduce risks associated with non-compliance.

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: