Trust or Company Services Provision (TCSP) work has come under ever increasing scrutiny in recent years, including in the Financial Action Task Force (FATF) Report: Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, 2013; the HM Treasury National Risk Assessment, 2017; and more recently in the FATF Mutual Valuation Report, 2018, which stated, "the UK is particularly exposed to criminal exploitation of otherwise legitimate economic activities and structures. As such, corporate structures and trusts are used in almost all high-end money laundering cases, including to launder the proceeds of corruption."
The use of legal entities, for example Limited Liability Companies and Scottish Limited Partnerships, and Trusts can be used by criminals to obscure the true origin and ownership of assets. Further, engaging with a law firm to provide trust or company services can provide a certain legitimacy to a structure. There are many legitimate reasons for using trusts and corporate vehicles, however, it is vital that law firms remain vigilant when dealing with or creating structures and sense check the rationale for using such structuring.
Initial analysis of the inaugural AML Certificate has highlighted a lack of understanding of what constitutes a Trust or Company Service provider. To be clear and by way of example, even if you or your firm only offers Registered Office to a legal entity or you incorporate a legal entity for and on behalf of an existing client then, by definition:
- You are a Trust or Company Service Provider
- You have a business relationship with that client, and
- You are statutorily obliged to comply with the Money Laundering Regulations when delivering such services
We have created a dedicated TCSP toolkit to provide further guidance. Please feel free to contact us with your comments or questions and we will use your feedback to continue adding to the toolkit.
For your reference, Regulation 12 of the Money Laundering Regulations, 2017, stipulates the products and services offered by solicitors that are within scope.