AML Guidance for Trust or Company Service Providers
The National Risk Assessment 2025 identifies company formation and associated trust and company services as being among the highest risk services provided by the accountancy sector. The NRA also assesses there to be a high risk that UK partnerships and companies will be abused for money laundering. They can be used to enable the laundering of millions of pounds, conceal the ownership of criminal assets and facilitate the movement of money to secrecy jurisdictions. The risk is highest when coupled with other high-risk services or high-risk factors, such as a client in a high-risk country.
There is also a high risk when a new client approaches a firm for a one-off company formation, with no ongoing services required. Accountancy sector firms that offer registered office or nominee directorships are also at risk of exploitation as those services can enable the concealment of beneficial ownership. Law enforcement have indicated that many investigations into money laundering lead to complex corporate structures.
By creating structures that disguise the ownership of assets, the accountant may be either wittingly or unwittingly involved in ‘integration’ of the illicit funds into the legitimate economy.
HMRC has published guidance on Understanding risks and taking action for trust and company service providers which covers:
- responsibilities of senior managers
- risk assessment, policies, controls and procedures
- customer due diligence
- reporting suspicious activity
- record keeping
- staff awareness
- trust or company service providers risk indicators
Guidance – Money Laundering Risks for Small or Medium Practices Offering Trust or Company Services
The National Risk Assessment (NRA) identifies company formation and associated trust and company services as being among the highest risk services provided by the accountancy sector.
This guidance has been specially formulated for AIA Members in Practice offering Trust or Company Service work and is influenced by the outcome of AIA’s 2022 Thematic Review into Money Laundering Risk for Small or Medium Sized Practices offering TCSP Work.
Access the GuidanceWebinar – Money Laundering Risk for Trust or Company Service Providers
The Money Laundering Regulations require firms which are undertaking Trust or Company Service work to take appropriate steps to identify and assess the risk that they could be used for money laundering, including terrorist financing.
TCSP activity includes:
- company formation
- acting or arranging for someone to act as a director or secretary of a company, a partner of a partnership or in a similar capacity in relation to other legal persons
- providing a registered office, business address, correspondence or administrative address or other related services
- acting or arranging for someone to act as a trustee of an express trust or nominee shareholder for someone not listed on a regulated market.
By knowing and understanding the risks, your firm can help ensure that criminals find it difficult to exploit these services.
This informative webinar explores practical approaches that firms can take to efficiently identify key risks to accountancy firms acting as Trust or Company Service Providers, including updates reflecting the UK’s National Risk Assessment and other emerging threats and trends. This webinar will help supervised firms ensure they maintain policies and procedures which meet regulatory requirements and best practice, appropriate and proportionate for their size and activities.
Risk Overview
- customer unwilling or refuse to provide information including documentary proof of himself/herself or beneficial owner(s) of trusts or companies
- carry out transactions for themselves or on behalf of the company that does not correspond with their background
- the beneficial ownership is veiled in complexity making it impossible to determine
- client is secretive about the reasons for and way a company structure is being set up
- client favours legal entities that are not transparent or do not require registration of beneficial ownership information
- client wants to use jurisdictions with, for example, weak anti money laundering laws or controls, limited corporate registration requirements, where there is no requirement to update ownership changes, unrestricted bearer share usage, secrecy laws or limited beneficial ownership information requirements
- searches on a customer or associate show, for example, adverse media attention, disqualification as a director, convictions for dishonesty or association with bribery in relation to contract procurement
- your searches indicate connections to politically exposed persons or their family members
- where the customer is, or appears to be, acting on behalf of another person, an unwillingness to give the names of the persons they represent
- The person acting as a director or representative does not appear to be a suitable representative or does not appear to have the expertise that the role requires
- clients whose owners or directors have a lavish lifestyle that appears to exceed known sources of income
- frequent changes in ownership, officers, beneficiaries or trustees
- establishment of multi-jurisdictional and/or complex structure of corporate entities and or trusts without obvious commercial rationale
- the use of multiple companies or trusts which adds a layer of complexity to ownership particularly where those layers seem unnecessary, for example, trusts owning trusts or offshore shell companies
- the fee paid is considerably more or less than you would expect for the level of services provided
- professionals assisting customers to use schemes that can disguise income, assets and ownership
- customers or professionals being evasive or reluctant to provide required CDD information or documentation or where ownership is said to be confidential
- the number of intermediaries or professionals used seems excessive or there seems to be no need for a professional
- excessive or unnecessary use of nominees
- intermediary chains where trust or company service providers act as nominee director for large numbers of limited companies
- intermediary chains where trust or company service providers market themselves and their jurisdictions as facilitating anonymity and disguised asset ownership
- payments (local or foreign) are made or received without a clear connection to the actual activities of the corporate entity
- use of off-shore bank accounts without legitimate economic requirement and where sources and/or destinations of funds are unknown
- establishing a company primarily for the purpose of collecting funds from various sources which are then transferred to local or foreign bank accounts that have no apparent ties with the company
- large movement of funds through a company with no good legal or commercial reason or an absence of any underlying transactions
- The transfer of funds in the form of “loans” to individuals from trusts and non-bank shell companies facilitating a system of regular transfers to these corporate vehicles from the “borrowing” individuals in the form of “loan repayments”
- incorporation of a company by a non-resident with no links or activities in the United Kingdom or the jurisdiction where the company is established
- the parties are native to, resident in, or incorporated in a higher-risk country
- the money flow generated by a company is not in line with its underlying business activities
- shares owned by companies and trusts in off-shore jurisdictions or high risk third countries or countries with high levels of corruption, illicit drug dealing or organised crime
- multiple appearances of the same parties in transactions over a short period of time
- the purchase of companies that have no obvious commercial purpose
- companies which continuously make substantial losses
