The new gatekeepers of the financial system

Houses of Parliament, London

Update: STEP News 1 Nov: UK revises anti-organised crime strategy to target professional ‘facilitators’

Original blog:

Ben Wallace MP, UK Minister of State for Security at the Home Office, has called for more to be done to make lawyers and accountants who facilitate money laundering recognise their responsibilities.

As part of a House of Commons Treasury Committee evidence session (pdf) on Economic Crime, Simon Clarke MP asked whether lawyers and accountants were failing to appreciate the seriousness of money laundering. He noted that this may be because they haven’t been faced with the same level of fines as the banking sector has been.

In response Wallace said: ‘I absolutely agree with the point that the facilitators have not had the same focus on them as they should have done. They have a responsibility that they need to live up to and I would like to see them being put under more pressure to comply.’

These words mirror recent moves from the international community towards viewing practitioners such as lawyers and accountants as the new gatekeepers of the financial sector and an integral part of combatting money laundering. Publications such as the OECD’s Model Mandatory Disclosure Rules place a responsibility on advisors to report schemes that may have the effect of circumventing the Common Reporting Standard. The EU’s DAC6 (pdf) put similar requirements on intermediaries who design or promote tax-planning schemes.

Underlining the discussion in the same Treasury Committee session, Robert Buckland MP, the Solicitor General, called the creation of a new corporate criminal offence of failing to prevent economic crime a ‘very important priority’ for him.

Perhaps summing up the changing approach towards lawyers and accountants, Wallace said the following after he was asked if there should be more of a focus on the accountancy world when it came to enabling economic crime: ‘In this half of the year, my message to the facilitators is this: we have had a lot of focus on banks; my investigators are going to be focusing on you.’

STEP will continue to monitor relevant developments both in jurisdictions and with international bodies, as well as providing updates where appropriate.

Daniel Nesbitt, Policy Executive, STEP 

 

How will the UK budget affect STEP members?

Budget red boxUK Chancellor Philip Hammond delivered the final budget before the UK leaves the EU yesterday. Here are some of the key measures that may affect STEP members.

Individuals

Income tax: the personal allowance threshold, the rate at which people start paying income tax at 20 per cent, is to rise from GBP11,850 to GBP12,500 in April 2019. The higher rate income tax threshold, the point at which people start paying tax at 40 per cent, is to rise from GBP46,350 to GBP50,000 in April. Subsequently, the two rates will rise in line with inflation.

Entrepreneurs’ relief: changes to the qualifying terms. Disposals of shares only qualify where the shares entitle the holder to 5 per cent of any dividends and 5 per cent of assets on a winding up. In addition, for disposals after 6 April 2019, assets will need to have been held for a period of two years (rather than one year).

Principal private residence relief: the period of deemed occupation at the end of a period of ownership is being reduced from 18 months to nine months with a withdrawal of the rental relief element in all circumstances, except where the owner co-occupies with the tenant. The principle that the relief should apply to all properties was reaffirmed.

Capital gains tax: lettings relief is to be limited to where the owner is in shared accommodation.

Charities

Small trading tax exemptions for charities: raising the exemption upper limits from GBP5,000 and GBP50,000 to GBP8,000 and GBP80,000 respectively.

Gift aid donor benefits: simplifying the limits on benefits that charities can give to their donors to acknowledge donations.

Gift aid small donations scheme: increasing the small donations limit using cash or contactless payments from GBP20 to GBP30.

Retail gift aid scheme: relaxing the requirement to issue annual letters.  Charities will now only need to issue letters once every three years, rather than every year where a donor’s total donations in a given year are less than GBP20.

Trusts

The budget Red Book referred to the government’s trusts consultation, but the consultation date has not yet been confirmed:

3.15 Trusts consultation – As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler,
fairer and more transparent.

STEP has a trust consultation working group in place to review the consultation document as soon as it is published.

Companies

Individuals providing services via personal companies: the provisions that have applied in the public sector since April 2017 are being extended to private companies from April 2020. These provisions impose a duty on the ’engaging’ company to operate PAYE on amounts paid to the service company. These provisions will only be applied to large and medium-sized businesses.

STEP will continue to monitor the progress of the budget proposals and keep members updated.

Emily Deane TEP is STEP Technical Counsel

Addressing mental health in the workplace

10 oct 18 speakersSTEP marked World Mental Health Day on 10 October with The Capacity Conversation: Best Practice, an event hosted by the Employer Partnership team and the Mental Capacity Special Interest Group in London.

Simon Hardy TEP of Kingsley Napley explained that clients need to plan for loss of capacity, but many have not done so. While the UK has 12 million over-65s, and an estimated 850,000 dementia suffers, little more than 3 million LPAs and EPAs have been registered. When assessing someone’s capacity, the best way is to let them talk, he said, making sure that you find out their wishes, while showing that you care and are compassionate.

Laura Brayston and Claire Tomkins of Freeths, one of STEP’s Platinum Employer Partners, discussed their firm’s holistic approach to mental health at work. Freeths has instigated a top-down approach, with senior managers, who are supplied with e-learning resources, supporting initiatives to care for staff in an open and inclusive environment. The staff feel invested in, and cared about by their employer, they value mental health resources and support groups, and also appreciate treats such as snacks and drinks on Fridays.

Dan Walshe of the charity, Rethink Mental Illness, observed that mental health includes emotional, psychological and social wellbeing. It affects how we think, feel and act, and like physical health, can change over time. With an estimated one in four people affected, mental health costs employers up to GBP42 billion a year. Presenteeism (working while unwell and not fully functioning) costs from GBP18-26 billion a year, with absenteeism and staff turnover each costing GBP8 billion.

Six key recommendations for employers from Rethink Mental Illness:

  1. Produce, implement and communicate a mental health at work plan;
  2. Develop mental health awareness among employees;
  3. Encourage open conversations about mental health and the support available to those struggling;
  4. Provide good working conditions for employees;
  5. Promote effective people management; and
  6. Routinely monitor employee mental health and wellbeing.

Resources from Rethink Mental Illness:

To find out how other organisations are tackling mental health in the workplace read our STEP Journal article, Thriving at Work (pdf).

 

Laura Keith, Programme Manager – Employer Partnerships, STEP

Do UK money laundering regs extend to trusts in other jurisdictions?

departure board europeanSTEP’s Isle of Man branch has flagged potential issues raised by the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (the Regulations) which give effect to the requirement of the EU Fourth Anti-Money Laundering Directive to have a central register of trusts, and reporting obligations on trustees.

The branch has queried whether the Regulations (Part 5, the trusts register) only apply to persons acting in the course of a business carried on by them in the UK (Regulation 8(1)). If this is the case, then Part 5 would not apply to trustees in the Isle of Man and elsewhere outside the UK.

As the Regulations are not part of the domestic law in jurisdictions outside the UK, it is unclear whether trustees in these jurisdictions have a ‘legal obligation’ to comply with Regulation 45. If there is a legal obligation for them to report, then conflicting data-protection issues may be generated under the domestic law.

In addition, the Regulations contain sanctions (fines and imprisonment) for non-compliance that HMRC, which manages the UK’s central register of trusts, may be able to enforce against trustees who do not comply.

STEP has raised these ambiguous points with HM Treasury (HMT), which laid the relevant Regulations, in order to gain some clarity. HMT has confirmed that its interpretation is that the definition of ‘non-UK trust’ within Part 5 of the Regulations extends to all express trusts that receive income from a source in the UK, or have assets in the UK on which they are liable to pay a relevant UK tax, regardless of whether they are established outside of the UK.

In these circumstances, HMT asserts that the trustees will indeed be required to comply with the record-keeping and, where relevant, registration requirements within Part 5 of the Regulations.

STEP will keep members informed on any further developments.

Emily Deane TEP is STEP Technical Counsel

Employer partners gather at STEP Global Congress

STEP Global CongressWe’ve just returned from the STEP Global Congress in Vancouver – what a great event it was, reports Nigel Race.

Congress kicked off with two excellent keynote sessions on the theme of change: ‘Change has changed’, which was focused on change in the individual practitioner; and ‘Serving the New Clientele’, which looked at cultural types and an emerging client-hybrid culture. Two top-ranking speakers, James Grubman TEP and Dennis Jaffe TEP, made the case for developing stronger interpersonal skills and cultural knowledge to better serve clients and emerging client groups. We discussed with Dennis the possibility of bringing that session to a wider audience at some point in the future. Perhaps this might be a special offer for STEP’s Employer Partnership Programme (EPP)!

And on the theme of EPP, it was fantastic to see so many accredited firms present this year. There were no EPP-accredited firms at the first Congress in Miami, only a couple at Amsterdam in the very early days of EPP in 2016, and now, at Vancouver, we had 11 partners*. It is growing into a great community and will only continue to grow. It was nice to bump into Leanne Kaufman TEP, President Royal Trust, RBC, who has done so much to support STEP and EPP. And many congratulations to Borden Ladner Gervais LLP on its award. What a cheeky move to achieve the accreditation just in time to receive it on home soil and at the STEP Global Congress! Nancy Golding TEP, a member of the STEP Worldwide Board, received the award on the Friday morning in front of the whole auditorium. Well done to Nancy and her colleagues at BLG – we were delighted to make the award to you.

With Congress now over, we’ve been taking stock and reviewing the event. Feedback from sponsors and delegates has been outstanding. We had 95 per cent of delegates rating it as excellent or good, 97.5 per cent saying they would attend a similar event in the future, and the sponsors were delighted to have so many high-profile, senior figures in the industry.

STEP has already received bids to hold the next event – watch this space!

*EPP attendees at STEP Congress:

  • Burges Salmon (England and Wales)
  • RBC Estate & Trust Services (Canada)
  • Rawlinson & Hunter (Cayman Is, E&W)
  • BLG (Canada)
  • Farrer (E&W)
  • Wright Johnston & Mackenzie (Scotland)
  • Stonehage Fleming (Switzerland)
  • Mishcon de Reya (E&W)
  • Butterfield Trust (Guernsey)
  • Carey Olsen (Guernsey)
  • Bedell Cristin (Jersey)

 

Nigel Race is Director, Professional Development at STEP