Agencies may be subject to money laundering regs

Recruitment agencies are likely to be subject to the new Money Laundering Regulations according to Barry Roback, Joint Chief Executive of JSA Group, which manages the financial affairs of over 4,500 contractors in the UK and overseas.

This claim was made at a recent seminar for recruiters on the new Conduct of Employment Agency Regulations and post Budget review.

Barry Roback pointed out that the definition of a 'relevant' business was not spelt out in the new regulations, and had been widely assumed to refer mainly to organisations such as banks, accountants, lawyers, estate agents and casinos. However, one of the listed qualifications included organisations 'issuing electronic money'. As virtually every recruitment consultancy paid its contractors electronically, it was hard to see how they could be exempt, he added.

Barry Roback, JSA

Mr Roback, who is also on the UKTECH 'Ask An Expert' panel warned that recruitment consultants would therefore need to be vigilant in future about the provenance of their clients and contractors. For example, it was not unusual for a client to ask an agency to take over an existing contractor workforce. Unless the agency checked that the candidates actually existed or were genuinely qualified to carry out the tasks they were being paid for, they could unwittingly find themselves party to a money laundering scam.

He told the delegates: "Of course agencies are already subject to the Proceeds of Crime Act but these regulations, coupled with the new Conduct of Employment Regulations, mean more unwelcome bureaucracy."

Consultative paper

Barry Roback also flagged another potential twist to IR35 in a recent Budget press release 5. This release states that the Revenue wants to ensure that 'targeted tax incentives support the Government's objectives for growth, enterprise and productivity' and announces that Government proposes to 'consider the issues raised by the interaction with the tax system of definitions of the income of self-employment and the remuneration paid to owner managers'.

A consultative paper will be released in November 2004, which according to Barry Roback could indicate the possibility of revisiting IR35 and further legislation in next year's Budget.

He said: "There is no doubt that agencies face a number of tricky issues that could effect the delicate relationship with their clients but at least there is the compensation that business in many sectors is looking much more positive than last year and placement rates are generally well up."