Recommendation 39

HM Government · verbatim extract Acknowledged

The government is very conscious of the risks posed by the abuse of UK companies. Companies can be formed directly with Companies House or through TCSPs supervised by HMRC or professional bodies (such as lawyers and accountants). HMRC supervises less than 10% of UK TCSPs and some HMRC-supervised specialise in selling companies to professional service providers such as lawyers and accountants who then make these companies available to their own clients. As such, a whole system response is required to the risks around TCSPs, including through Companies House reform, and this response addresses the issues rather than focusing on any particular agency. HM Treasury is co-ordinating a cross-agency Action Plan to tackle the risks posed by abuse of UK companies, including through TCSPs and HMRC are very much committed to playing a part in that work. For this reason, HMRC have intensified their supervision of TCSPs, including through the successful completion of a week of action (in October 2021), which included promoting an updated TCSP risk assessment, hosting an online seminar on risks associated with Registered Office Address services and speaking at three industry conferences, and reviewing those publicly advertising formation services to ensure they were properly supervised. HMRC also conducted on-site compliance inspections at 90 TCSP premises. In December 2021, HMRC published its latest list of penalties for the non-compliant. 14 This included 3 penalties imposed on TCSPs. The Government intend to continue to focus on supervisory efforts on high-risk activities, including TCSPs. The government recognises the value of SARs and that the levels of reporting from TCSPs are, on the face of it, low. In large part, this may be due to the fact that businesses self-identify when making a SAR, and they generally do not identify themselves as TCSPs, but instead report under their primary business sector, (e.g. lawyer, accountant, serviced office providers) rather than as a TCSP. The government will continue to focus on this issue. For its part, HMRC guidance explains the importance of reporting suspicions of money laundering or terrorist financing by filing SARs and this message is reinforced by HMRC webinars and attendance at trade body meetings and conferences, including jointly with the NCA. HMRC works closely with the NCA’s Financial Intelligence Unit on promoting this message, arranging for them to speak at trade conferences and has agreed to jointly host a bespoke webinar on the subject of SARs targeted at TCSPs about the risks they need to be aware of and their reporting obligations when they come across suspicious activity. To improve TSCPs’ understanding of, and compliance with, the Money Laundering Regulations, HMRC works closely with the other TCSP supervisors and has published improved and updated risk information for the sector. HMRC’s compliance interventions, guidance, webinars and trade body engagement have helped TCSPs improve their own risk assessments. Whilst the majority of the supervised population wants to be compliant, getting risk assessments right is an area of concern to all supervisors. HMRC will continue to focus on improving these across the sector as good risk assessment is fundamental to TCSPs’ overall effectiveness in guarding against criminal exploitation of their services HMRC addresses the quality of risk assessments right from the point when businesses apply to be supervised. The processes for checking that key TCSP personnel are ‘fit and proper’ before being allowed to start TCSP activity has been made more rigorous. HMRC’s supervision already targets higher risk TCSPs, using a risk- and intelligence-led approach. HMRC TCSP compliance inspection activity has been centred on those assessed as providing higher risk services, supported by a public/private threat assessment (PPTU) project led by the NECC which identified specific higher risk businesses for cross-agency follow-up.