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Money Laundering and company formations

Money Laundering and company formations

There are plenty of online company formation agents out there and you can now form a company for less than £30. My understanding is that company formation agents are now covered by the Money Laundering Regulations and as such they should be verifying the identity of their customers. The ones that I am currently using have not changed their process during the last 2 years and do not appear to be taking any steps to verify either my identity (as the registered user) or the identity of my clients who are the beneficial owners of the new company.

Should I be worried by this apparent lack of compliance and be looking to use a more reputable agent? If so can anyone recommend one that does comply with the regulations and outline how they do this and what their charges are.

Many thanks

Simon Oates


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10th Jun 2008 06:43

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Thanks (0)
08th Jun 2008 19:51

I agree with Richard (up to a point)

There are two regulations in MLR 2007 which may be relevant here.

Reg 17 deals with 'reliance'. If the formation agent is dealing with a solicitor or an accountant who is supervised by one of the bodies listed in Part 1 of Schedule 3 to MLR 2007 (such as ICAEW, ACCA, etc) and if the solicitor / accountant agrees to be relied upon, then the formation agent may place reliance on the customer due diligence procedures performed by the solicitor / accountant.

It may be the case that the agreement of the solicitor / accountant to be relied upon is contained in a clause in a standard form of agreement with the formation agent.

Where Reg 17 operates it satisfies the requirements of Reg 5 (below).

Reg 5 deals with customer due diligence in relation to a 'beneficial owner' (such as a significant shareholder in a company being formed) and provides that, in relation to a beneficial owner, the formation agent shall take "adequate measures, on a risk-sensitive basis, to verify his identity so that the relevant person is satisfied that he knows who the beneficial owner is".

Where an accountant is instructing the formation agent he may take the view that obtaining signed forms (with details of name and address) from that accountant provides him with sufficient information to satisfy him that he knows who the beneficial owner is.

It does not, of course, follow that if the formation agent is satisfied the accountant must also be satisfied, especially as the individuals seeking to form the company are likely to be the clients of the accountant (whilst they are not clients of the formation agent). So the due diligence required by the accountant is greater than that required of the formation agent in relation to those individuals.


Thanks (0)
08th Jun 2008 12:50

MLR Compliance
Thank you for your comments guys.

Under the MLR requirements, if our client is also governed by the regulations that so long as we can confirm they are who they say they are then we are not required to confirm their clients identity. So for example, if our client is an accountant, is not a Limited company, and who is a member of ICAEW then we confirm their membership with ICAEW. We have then carried out our obligations to MLR2007.

If we receive an order for Joe Public or other who is not already regulated, then we basically do what an accountant does and verify the client through a number of channels.

There are several variations to what we have to do to comply, such as if they are a Limited company or are not a member of a regulated body. This message could go on for pages if I went through every process :). Needless to say though, we did obtain professional guidance on what we were required to do and then documented the processes for each eventuality.

If you are interested in our prices I can either direct you to, or drop me a line.

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07th Jun 2008 14:02

I second that.

I also use Quickformations.

As well as confirming our identity I seem to recall signing something to the effect that we are a regulated firm and do ourselves comply with the MLR in respect of our clients.

I am not sure what their policy/procedure is for unregulated customers.

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07th Jun 2008 09:34

We use QuickFormations . When the 2007 MLR came in, they required us as their customer to verify our identity. I cannot remember just what we had to do, but it was fairly quick and easy.

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