FIN074 returns – who needs to pay the Economic Crime Levy

Regulation 8 of the MLRs[2] sets out the relevant persons that are subject to the MLRs. This includes credit institutions and financial institutions. 

The definition of a credit institution is outlined in regulation 10(1)[3] and the definition of a financial institution is given in regulation 10(2). 

Regulation 10(2)(a) states that firms that carry out one or more listed activity from Schedule 2 of the MLRs[4] will be classed as a financial institution – bringing them in scope of the MLRs. Some exemptions to this qualification are outlined in regulation 10(3).

If your firm has received a FIN074 return, we have assessed that it is subject to the MLRs. This likely means that we consider the firm to be either a credit institution or a financial institution. 

It may be that an exemption outlined in regulation 10(3) applies to your firm and it should not be classed as a financial institution. 

If you believe that one of these exemptions (or any other) applies to your firm, contact us[5] with an assessment of why you are not in scope of the MLRs. 

Make sure you get in touch well before the FIN074 due date. 

Consumer credit firms[6] who have received a FIN074 hold permissions to provide regulated activities that we have assessed will bring them under the scope of the MLRs. There are, however, certain exemptions to this depending on how a consumer credit firm uses its permissions. 

For instance, some consumer credit firms are authorised to enter into regulated credit agreements. This constitutes the listed activity of ‘lending’ under the MLRs. However, if ‘lending’ is the only MLR listed activity that a firm undertakes, then it may be exempt from the MLRs if it only offers credit agreements that fit the criteria set out in regulation 10(3)(b) of the MLRs.

Where a firm assesses that it may be subject to this exemption (or others), make sure you contact us[5] well before the FIN074 due dates. 

Some consumer credit firms are authorised to provide financial leasing, which comes under the scope of MLRs as it is a listed activity in Schedule 2 of the MLRs.  However, as explained in the Joint Money Laundering Steering Group (JMLSG) Guidance[7]:

'Operating leases are outside the scope of the ML Regulations. However, in practice for some firms it may be difficult to separate out this type of activity from other forms of leases, such as finance leases.' (See paragraph 11.8 of Part 2 to the JMLSG Guidance.)

The distinction between different kinds of hire purchase and lease agreements for MLR purposes is outlined in more detail in Part 2 of the JMLSG Guidance under:

• section 11: ‘Motor finance’
• section 11A: ‘Consumer credit providers’
• section 12: ‘Asset finance’

If a firm is using its consumer credit permissions for agreements that are not within scope of the MLRs, contact us[7].

The activities of insurance firms are not in scope of the MLRs when carried out for contracts for general insurance. 

These activities are in scope when carried out for contracts for long-term insurance (for example, life policies).

There can be circumstances where insurance firms have additional permissions to provide regulated activities that may bring them within scope of the MLRs, for example if they carry out one or more of the listed activities in Schedule 2 of the MLRs. 

Depending on how insurance firms carry out these activities, they may be exempt from the MLRs. For example, regulation 10(3)(b) sets out a potentially relevant exemption for firms engaged in lending activity. Regulation 10(3)(c) may also be a relevant exemption for insurance firms with investment related permissions.

If you believe these exemptions (or others) may apply to your firm, contact us[9].

Should we agree that an insurance firm is exempt, we will remove the FIN074 return from its RegData profile.

Firms solely operating in the debt purchase sector are not within scope of the MLRs.

Firms that carry out other activities which fall within scope of the MLRs alongside their debt purchase activity will still be subject to MLR registration.