Autumn2013


obnoxious. The proposal is that if a single (albeit senior) HMRC officer has decided to refer a matter to the GAAR Advisory Panel, then without more a bank would be faced with a decision between self assessing on the basis that the relevant tax planning does not work (i.e. surrendering its usual tax appeal rights) or suffering application of the coercive blunt instrument sanction of reputational damage.


• The proposals for the potential imposition of a significant sanction (harm to reputation) are not balanced by any meaningful right of appeal.


Bradley Phillips, Chairman, Herbert Smith Freehills LLP


Insurance Law Committee


The Insurance Law Committee has met four times since December 2012. We have welcomed several new members during this period: Robert Carr of Greenwoods Solicitors; Beth Dobson of Slaughter and May; Philip Hill of Clifford Chance LLP; and Jonathan Teacher of Swiss Re.


The Committee’s work continues to focus on insurance contract law reform. David Hertzell, the Law Commissioner for commercial and common law, attended our meeting of 4 December 2012 to discuss the Law Commission’s review and reform of insurance contract law, which he is leading. We had previously submitted responses to the Law Commission’s Consultation Papers, and some of these were quoted in the Law Commission’s summaries of responses which were published in late 2012 and early 2013.


In the past year, the Committee has also submitted responses to the consultation papers issued by the FSA (as it was then) on the client money rules for insurance intermediaries (CP12/20) and on mutuality and with- profits funds (CP 12/38). We have also provided feedback on the Land Law Committee’s draft standard insurance provisions for leases of commercial property. Two members of the Committee are on the Law Society’s working party supporting the UK membership of the European insurance contract law initiative (the expert group of the DG Justice insurance contract law group).


The Committee continues to respond


to insurance law reform consultations and monitor closely legal and regulatory issues in the insurance sector at both UK and EU level. At the time of writing, we have formed a working party to prepare a response to the PRA’s consultation papers on solvent schemes of arrangement (CP 6/13) and on capital extraction (CP 7/13).


The Committee would be interested in recruiting new members; any member of the CLLS specialising in insurance (particularly in the life sector) would be welcome to contact me.


Richard Spiller, Chairman, Holman Fenwick Willan LLP


regulatory Law Committee


The Regulatory Law Committee meets monthly and has, since June, responded to the following consultations and statements.


1. JMLSG consultation on proposed amendments to its Money Laundering Guidance for the Financial Sector (the “JMLSG Guidance”)


Whilst the Committee did not have many comments on the proposed amendments, those that it had arose out of an issue which it considered to be an important matter of principle. The Committee noted that the JMLSG Guidance is an invaluable guide to firms as to the ways in which they may meet their legal obligations and is referred to by the FCA when judging firms’ compliance. The Committee therefore believes it is very important that the Guidance does not make broad ranging propositions overstating the obligations which a firm has as a matter of law or which do not, in their drafting, reflect the very wide range of business carried out by the different firms who are subject to the Money Laundering Regulations 2007 (the “MLrs”).


In particular, the Committee raised the following concerns in relation to the proposed JMLSG Guidance:


• Independent testing and reporting of firms’ risk-based approaches


The Committee commented that, as drafted, the JMLSG Guidance seems to require all firms to engage in independent testing and reporting of their risk-based approach. The Committee expressed its view


that this is neither appropriate nor proportionate for many firms.


• Qualification to firms’ abilities to apply simplified due diligence as permitted under Regulation 13 of the MLRs


The Committee expressed strong concern regarding the apparent qualification to a firm’s ability to apply simplified due diligence, as permitted under Regulation 13 of the MLRs. The JMLSG Guidance appears to suggest that firms are required to carry out an analysis of risk by country or by firm before applying simplified due diligence, which is not required under Regulation 13. The Committee noted that it may not be the JMLSG’s intention to place additional requirements on firms, but that the drafting is not clear.


• Requirement to update and review customer due diligence (“CDD”) documentation


The Committee noted that the statement that firms should ensure that documents collected during the CDD process are “kept up to date and relevant by undertaking reviews of existing records” was too absolute, as it would not be appropriate to do so in all circumstances.


• Identification of beneficial ownership


The Committee expressed concern that the proposed additional JMLSG Guidance appears to require firms to do more than is required under the MLRs. The Committee noted that the current definition of beneficial owner directs firms to look at those owning or controlling 25% or more of shares or voting rights. However, the additional guidance seems to suggest that where there is no such owner, firms must nevertheless identify all those who in fact own less than 25% in order to determine in each case whether they “exercise effective control”, a concept for which there is no definition. The Committee expressed its view that this additional guidance places firms in an extremely difficult position and that it is not aware of any reason why it should be necessary to introduce it.


2. Announcement by the FCA that firms which need authorisation under the AIFMD will need to be


City Solicitor • Issue 83 • 5


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