Criminal record checks
The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) which came into force on 26 June 2017, state that the IFA must approve all beneficial owners, officers and managers (BOOMs) of IFA supervised firms engaged in public practice and sole practitioners.
The approval process seeks to ensure that no BOOM has been convicted of a relevant offence as set out in Schedule 3 to the MLR 2017. Individuals who have an unspent criminal conviction of a relevant offence cannot act as a BOOM.
Further guidance on the definition of BOOM.
Firm/sole practitioner responsibilities
1. Complete the IFA firm return by 26 June 2018
Firms and sole practitioners engaged in public practice must complete the IFA firm return by 26 June 2018. The firm return includes information on all BOOMs.
An individual who is on our records as at 26 June 2018 does not need to apply to the IFA for approval to be a BOOM. The approval is automatic if the BOOM does not have any relevant unspent criminal convictions for offences listed in Schedule 3 to the MLR 2017.
Any person who is a BOOM with relevant unspent convictions will be committing a criminal offence with the potential of up to two years in prison and/or a financial penalty.
2. Ensuring BOOMs do not have a relevant unspent criminal conviction
Firms and sole practitioners must take reasonable care to ensure that no-one is appointed, or continues to act, as a BOOM who has a relevant unspent criminal conviction.
MLR 2017 regulation 26 does not mandate that supervised firms undertake a criminal records check on all BOOMs. However, firms and sole practitioners should carefully consider what measures can be put in place to ensure that this requirement is met.
Our strong recommendation is that firms and sole practitioners evidence compliance with regulation 26 by obtaining basic criminal record checks for all BOOMs prior to 26 June 2018.
HM Treasury guidance on regulation 26 to professional bodies stated that a self-declaration of unspent criminal convictions for offences in Schedule 3 to the MLR 2017 is not adequate proof for compliance.
For the basic criminal records check, firms and sole practitioners should use the following disclosure services:
The disclosure service chosen will be dependent on where BOOMs live and work.
3. Inform the IFA of changes to BOOMs after 26 June 2017
Firms and sole practitioners must contact the IFA immediately if there are changes to BOOMs in the firm by contacting firstname.lastname@example.org
Any person who is a BOOM after 26 June 2018 without the IFA’s approval (i.e. BOOM with relevant unspent convictions) will be committing a criminal offence with the potential of up to three years in prison and/or a financial penalty.
4. Inform the IFA if BOOMs have a relevant unspent criminal conviction
In accordance with the MLR 2017, firms and sole practitioners must inform the IFA if a BOOM has a relevant unspent criminal conviction as set out in Schedule 3 to the MLR 2017 within 30 days of the date on which the firm and sole practitioner becomes aware of the BOOM’s conviction by emailing email@example.com
In such cases, the BOOM will no longer be approved by the IFA (or any other supervisor) as being a fit and proper person to be engaged in public practice.
IFA responsibilities as a supervisory authority
As required by the MLR 2017, the IFA will be adopting a risk-based approach to its AML supervisory duties and in so doing, will be looking at how firms and sole practitioners meet their obligations of having no BOOMs who have unspent criminal convictions as set out in Schedule 3 to the MLR 2017.
1. Monitoring reviews: evidence of criminal record checks
From 26 June 2018, the IFA will be asking firms/sole practitioners to provide evidence that their BOOMs do not have relevant unspent criminal convictions as set out in Schedule 3 to the MLR 2017.
Under HM Treasury guidance, the IFA is not permitted to accept a self-declaration as adequate proof of compliance with regulation 26. Our strong recommendation is that firms and sole practitioners evidence compliance with regulation 26 by getting basic criminal record checks for all BOOMs.
2. New BOOM applications after 26 June 2018
After 26 June 2018, individuals who meet the BOOM definition and want to become a practising member of the IFA will have to undertake a basic criminal record check as part of the membership application process to demonstrate that they do not have any unspent criminal convictions as set out in Schedule 3 to the MLR 2017.