Group life policies and other pure protection arrangements are to be exempted from anti-money laundering obligations under proposals published by HMRC today.
Both excepted and registered trusts are to be exempted from having to be registered at the Trust Registration Service (TRS).
Group risk industry lobbyists are celebrating a successful campaign to exempt group life from the new rules, which come in with the Fifth Anti-Money Laundering Directive.
A consultation on the new rules says:
3.15 The use of trusts to hold life insurance policies, income protection policies or policies solely for the payment of retirement death benefits is often for estate planning purposes. Where the trust consists solely of a policy which is a pure protection policy and payment is not made until the death or terminal illness of the insured, it is proposed that these trusts will not be required to be registered on TRS as that would be disproportionate to the risk of them being used for money laundering or terrorist financing activity.
3.16 Registered pension schemes held in trust are already subject to regulation by either the Financial Conduct Authority or the Pensions Regulator. There are also income tax controls on sums going into and out of the fund, and the benefits that can be provided by the funds. These controls reduce the risk of them being used for money laundering and terrorist financing and it is therefore proposed that they are not in scope for registration. Pension scheme trusts that are not registered with HMRC on ‘Pension Schemes Online’ or ‘Manage and Register Pension Schemes’ will be required to register on TRS
It is possible there will be a potential small impact on life claims where providers pay into a trust.
The Directive requires that, when entering into a new business relationship with a trust, obliged entities must collect either
- proof of registration on the trust register, or
- an excerpt of the register
4.29 The government proposes that the onus will be on the trustee to provide this information rather than the obliged entity having direct access to the register. This means the trustee has control over who sees the information.
4.30 It is intended that there will be a facility within TRS to download this information into a PDF form. This facility will allow trustees to share the relevant information when it is requested by the obliged entity.
4.31 It is proposed that the PDF will include the date when it is issued to ensure that the obliged entity has confidence that the information is up-to-date. It will also contain a digital HMRC signature, which provides additional verification.
4.32 There will be help for customers who are unable to use digital services.
Canada Life Group Insurance marketing director Paul Avis says: “By coming together with the ILAG, GRID and ABI aligned, highlighting that local jurisdictional decisions would be respected, the industry lobbied hard on the back of the fact that where the trust consists solely of a ‘pure protection policy’ (as defined by the FCA) where payment is not made until the death or terminal illness of the insured, it was argued that there is virtually no chance, almost a non-existent risk, that these trusts could be used for money laundering or terrorist financing activity. And our message was heard. The proposal from HMT to exclude these policies from trust registration should be embraced as sense has prevailed and the industry has been heard.”