MLR 2017 Regulation 26: BOOM Approval and HMRC Checks

Regulation 26 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) controls who can own, direct or manage certain regulated businesses. HM Revenue and Customs (HMRC) calls the people covered the beneficial owners, officers and managers, or BOOMs. This guide sets out what HMRC says about who needs approval, what the check covers, deadlines, and the consequences of getting it wrong. It sits alongside our guide to HMRC AML enforcement and penalties.

Who needs approval

According to HMRC's Economic Crime Supervision Handbook, the approval regime sits under regulation 26 and covers beneficial owners, officers, senior managers and sole practitioners. HMRC says officers include nominated officers, directors, company secretaries, chief executives, people controlling a company, committee members, partners and anyone acting or claiming to act in those roles. Senior managers are those who make compliance decisions or run regulated activities. The handbook says the check applies to accountancy service providers, art market participants, estate agency businesses, high value dealers and letting agency businesses, and that bill payment service providers and telecoms, digital and IT payment service providers are exempt.

What the check actually tests

HMRC says this is not a fit and proper test. It looks only at whether the person has an unspent conviction for a relevant offence. Relevant offences are those listed in Schedule 3 of MLR 2017, and convictions abroad count if they would have been Schedule 3 offences in the UK. In practice, a person with no relevant unspent conviction will be approved, so the real work for the business is accurate disclosure and ongoing monitoring rather than persuading HMRC of anything.

Timing: before registration, and before taking the role

The handbook says all BOOMs must be approved before the business is registered, and later appointees must apply before carrying out the role. An application needs a fee and enough information to check for relevant convictions. HMRC says a BOOM may start work once the application is submitted but must stop immediately if they fail, and that HMRC may re-check a BOOM's status at any time.

Notification deadlines

• A person convicted of a relevant offence must notify HMRC within 30 days of the conviction, and the business must notify HMRC within 30 days of becoming aware.
• HMRC's separate page on missing BOOMs says businesses generally have 30 days to notify changes, including updates to BOOMs, reduced to 14 days when a nominated officer or compliance officer is appointed.
• If a BOOM named on Companies House is missing from an application or registration, HMRC may give the business 21 days to add them.

What happens if someone fails

HMRC says that if a business has one BOOM and that person fails, the business cannot trade. If it has several and only one fails, it can continue but the failed person must stop work immediately. The handbook says that if a beneficial owner is convicted of a relevant offence, HMRC can apply to the High Court, or the Court of Session in Scotland, under regulation 26(11) for an order to sell that person's interest in the business.

Criminal offence and penalties

According to the handbook, acting as a BOOM without approval is a criminal offence under regulation 26(12). On summary conviction the penalty is up to three months' imprisonment, a fine, or both, and on conviction on indictment up to two years, a fine, or both. Failing to notify HMRC of a conviction may lead to a type 3 penalty, and the handbook says finding an omitted BOOM during its checks can also lead HMRC to consider a type 3 failure to notify penalty.

What the business must do

HMRC says businesses must take reasonable care not to appoint or retain an unapproved officer or manager. It expects checks such as Disclosure and Barring Service checks and a process for learning of later convictions. Principals who use agents or franchisees should obtain checks on those agents. HMRC also checks Companies House and the business's website during registration to find BOOMs left off an application, and anyone named as a BOOM on Companies House must be included. Sole proprietors and partnerships do not register on Companies House, so that check does not apply to them.

Our suggestions for keeping a BOOM register

These are Learnsignal's suggestions, not HMRC requirements. Keep a live register of every owner, director, partner, nominated officer and senior manager, with the date each was approved or applied. Compare it with the Companies House officer list every quarter. Record DBS check dates and the person who reviews them. Add a standing item to every board or partner meeting asking whether anyone has a conviction or pending charge. Make the 14, 21 and 30-day clocks visible to whoever handles registrations. Training for owners and managers is available through Learnsignal CPD, and our guide to AML governance for MLROs and compliance partners covers the wider governance picture.

What we could not confirm

We read two HMRC handbook pages and did not read the text of regulation 26 or Schedule 3 on legislation.gov.uk, so check the current wording and the list of relevant offences there. The handbook describes HMRC's process only, and we did not review how other supervisors, such as professional bodies that supervise accountancy service providers, run their own approvals. HMRC's page withholds its section on conditional approvals, so we cannot say how those work. The application fee amount was not stated on the page we read, and HMRC may have updated its handbook since.

Frequently asked questions

Is the BOOM check a fit and proper test?

HMRC says it is not. It looks only at whether the person has an unspent conviction for a relevant offence listed in Schedule 3.

Can a new director start before approval comes through?

According to HMRC, a BOOM may start work once the application is submitted but must stop immediately if they fail.

What is the penalty for acting as a BOOM without approval?

HMRC's handbook cites regulation 26(12): up to three months' imprisonment, a fine or both on summary conviction, and up to two years, a fine or both on indictment.