Recruiters who fail to comply with new money laundering regulations could face up to two years in jail and/or an unlimited fine, after HM Treasury confirmed that the new rules apply to certain part of the sector, according to Kevin Barrow, of solicitors Blake Lapthorn Tarlo Lyons.

Barrow told Recruiter that based on his conversations with officials, on 19 December, HM Treasury has confirmed their intention that the new rules, which came into effect on 15 December, apply to executive search or interim search firms who supply directors, company secretaries, partners or people for similar roles (see also Recruiter, 28 November).

HM Treasury intends that the new rules also apply to payroll agency and payroll companies that deal “to any material extent”  with temporary workers or contractors, says Barrow.

The regulations require that companies caught by the legislation: appoint a money laundering reporting officer, train relevant staff, carry out detailed specific checks on candidates and clients. In addition they must keep relevant records and report suspicions to the authorities. They must also apply to go on a special register by 1 April 2008.

Barrow says: “Failure to comply with the regime can be a criminal offence, even if the recruiter has not financially benefited from any money laundering - eg. the mere failure to carry out the correct checks may now be a serious criminal offence, even if the candidate is not a terrorist or drug trafficker.

“This regime is likely to be very burdensome for recruiters affected by it, and frankly it seems very disproportionate to impose on recruiters a regime which will be very burdensome for them, but which seems unlikely to vastly increase public safety.

“But given the position the regulators are taking, and the serious criminal penalties involved, it may now be very risky for any affected recruiter to put its head above the parapet and argue the point.”