ABYA wins landmark decision from HMRC on Anti-Money Laundering Supervision
Published: 18 January 2024
In the middle of 2023, ABYA obtained confirmation from the Financial Conduct Authority of its 2016 decision that the FCA Handbook did not require Yacht Brokers to have full permissions status to hold clients' funds in Pooled Client Accounts - contrary to the understanding and requirements set by many UK Banks.
HM Treasury also confirmed that in respect of Pooled Clients Accounts, UK Banks should be following the Joint Money Laundering Steering Group (JMLSG) guidance as approved by HM Treasury in August 2020. This sets out the level of due diligence a bank should undertake on its customer before permitting them to hold a Pooled Client Account.
THE ISSUE
In September 2023, ABYA was advised by some banks that they will only continue banking with those Yacht Brokers who are registered with HMRC for Money Laundering purposes and have appropriate controls in place to satisfy their risk appetite. ABYA challenged this decision by these banks, stating that it did not believe its Members needed to be registered with HMRC for AML supervision as our Code of Practice requires payments for vessels to be made by bank transfer. Despite this statement, the banks declined to accept our understanding of the legislation.
THE PROCESS
In order to prove that ABYA’s understanding was correct, we had to work with one of our smaller brokers to submit a test application to HMRC.
The HMRC application fee is based on the number of offices a business operates out of, and the number of directors and employees involved in that yacht broking business. The cost of the application alone for this particular small two-person brokerage, was in excess of £1,000. The application also required submitting a number of documents including:
- Listing agreements
- Sales particulars
- Sale and purchase agreements
- A copy of the ABYA Code of Practice.
The broker was also required to provide evidence of AML training undertaken by every member of staff in the business as well as its directors. Following the submission of all this paperwork, the HM Revenue & Customs Economic Crime Supervision and Fraud Investigation Service reviewed all submitted documentation, then conducted telephone interviews with the directors.
THE RESULT
The HMRC decision following this investigation of the Members application, was that it did not meet the HMRC High Value Dealers criteria to enable it to be added to the HMRC AML Supervision Register. This was not due to any issues with the paperwork submitted, quite the contrary, HMRC stated they were impressed with the standard of the documentation submitted. They also were impressed that ABYA Members are not permitted under its Code of Practice to accept cash, either as a single payment or multiple payments, for a single transaction with a value of Euro 10,000 (or equivalent) or more. This is a requirement to register under “The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
In light of the reasons for submitting this test application, HMRC has requested the member in question withdraw their application and have subsequently agreed to refund their application fee because there is evidence of ambiguity by UK Banks.
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Mark Matthews, ABYA Chairman said: “This is great news for ABYA Members. It provides a significant savings and demonstrates the fantastic work undertaken by the ABYA Regulatory Committee and the staff at the Glassworks.
We are sometimes challenged by our larger Members, questioning the benefits of belonging to ABYA. The response, as illustrated above, is simple, this landmark decision by HMRC would save our Members who have multiple offices, at least £5,000 in a single HMRC application fee, plus the additional costs of training and staff hours to submit and process the application. Without the tenacity of the ABYA regulatory committee, this cost savings would not be realised.”
Peter Norris, ABYA Regulatory Chair | ABYA & YDSA President said: “I would like to thank the ABYA Regulatory Committee, the team at the Glassworks, and the member who assisted us by offering their time, free of charge, to bring about this test application. Because of their diligence and determination, this landmark decision was achieved for all ABYA Members.
This case study clearly demonstrates that some of our UK Banks have people making significant choices which impact not only the processes, but the livelihoods of our Members and their families. So, we will certainly be taking this decision up with the banks in question. We will also be reaching out to our supportive Members of Parliament to lobby the FCA and to bring about necessary changes to the FCA Handbook. This requires employees of these influential banking institutions to not only have awareness of the legislation they are implementing, but to also demonstrate a high level of competence.”
