Accountant Tax Advisor Registration Scope Guidance Note

www.gfsc.gi
Accountants & Tax Advisors
Registration Framework
Scope Guidance Note
10 March 2025

Gibraltar Financial Services Commission VASP Registration Scope Guidance Note 1 Introduction The purpose of this document is to provide guidance as to the scope of the external accountancy and tax advisory activities caught under the Proceeds of Crime Act 2015 (Relevant Financial Business) (Registration) Regulations 2021 (“the Regulations”) 1 . Applicable Requirements The Regulations require that certain “relevant financial businesses” register with the Gibraltar Financial Services Commission (GFSC) 2 . In order for a firm to obtain this registration, it must comply with the requirements set out within the Regulations, as well as, the Proceeds of Crime Act 2015 (POCA) 3 , under which the Regulations are made. This guidance will focus on the activities of “relevant financial businesses” under POCA and the Regulations that also consider the standards and guidance as issued by the Financial Action Task Force (FATF) in applying a risk-based approach to these sectors4 . Further guidance in respect of the systems of control that these firms must have in place in order to prevent the misuse of their products and services for money laundering (ML), terrorist financing (TF) or proliferation financing (PF) activities, can be found within the GFSC’s AML/CFT/CPF Guidance Notes5 . Overview of Gibraltar’s Legislation & International Standards The GFSC has an established regulatory framework for financial services sectors which fall within its regulatory remit. Following the jurisdiction’s MONEYVAL Evaluation in 2019, a recommendation was made for Gibraltar to ensure that all activities identified as a “relevant financial business” be regulated for Anti￾Money Laundering (AML), Combatting the Financing of Terrorism (CFT) and Counter-Proliferation Financing (CPF) purposes. The aim of this action was to ensure that there is appropriate oversight and verification that these sectors are compliant with the obligations under POCA. As a result, a gap analysis was completed on the sectors that are caught within POCA but not within supervisory scope of any of the authorities. A registration regime was established by the GFSC which required the registration and regulation of these sectors for AML/CFT/CPF purposes. The review identified the following activities under Regulations 4(1)(a) and (b) of the Regulations:
(a) External accountants;
(b) Tax advisors;
(c) undertakings that receive, whether on their own account or on behalf of another person, proceeds in any form from the sale of tokenised digital assets involving the use of DLT or a similar means of recording a digital representation of an asset; or (d) persons that, by way of business, exchange, or arrange or make arrangements with a view to the exchange of− (i) virtual assets for money; 1 https://www.gibraltarlaws.gov.gi/legislations/proceeds-of-crime-act-2015-relevant-financial-business-registration￾regulations-2021-6002 2 Regulation 4 of the Regulations 3 https://www.gibraltarlaws.gov.gi/legislations/proceeds-of-crime-act-2015-2348 4 https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/RBA-Accounting-Profession.pdf.coredownload.pdf 5 https://www.fsc.gi/AMLCFTCPF_guidance_notes

Gibraltar Financial Services Commission VASP Registration Scope Guidance Note 2 (ii) money for virtual assets; or (iii) one virtual asset for another. Please note that this Guidance Note covers the External Accountant and Tax Advisory activities under points (a) and (b) above. The GFSC has issued a separate scoping Guidance Note relating to VASPs activities should you wish to refer to it6 . Carrying out Registered Activity by way of Business in or from Gibraltar In order for an accountancy or tax advisory entity to require registration with the GFSC, it must:

1. Carry out the activity by way of business (i.e. providing products and/or services to clients in return
   for remuneration);
2. Have a registered office in Gibraltar;
3. Identify and appoint a locally based Money Laundering Reporting Officer (MLRO) in accordance
   with Section 28 of POCA, who is a permanent, full-time employee of the firm seeking registration; and
4. Identify and appoint an individual to act as the firm’s AML/CFT/CPF Responsible Person in
   accordance with Section 9B of POCA.
   Under Regulation 7, the GFSC must refuse to register an applicant firm if it is satisfied that the firm’s MLRO or any of its directors, officers or beneficial owners is not a fit and proper person. When assessing fitness and propriety, the GFSC must take into account a number of factors, including the risk that the applicant firm’s business may be used to facilitate money laundering (ML), terrorist financing (TF) or proliferation financing (PF). Therefore, as part of its application process, the GFSC will assess these individuals’ fitness and propriety as well as, their competence and capability, where relevant. External Accountants Since 2021 external accountants have been required to register, and, the GFSC has determined that the following activities currently fall within the scope of the definition of “External Accountant”:

• Audit and assurance services (including reporting accountant work in initial public offerings);
• Preparation and signing off on accounts;
• Book-keeping and the preparation of annual and periodic accounts;
• Succession advice;
• Advice on investments and custody of client money;
• Payroll agents that provide accountancy services; and
• Forensic accounting.
  For further clarification purposes, the following definitions apply in relation to bookkeeping and accountancy services, which are currently the most common activities provided by external accountants in Gibraltar. These definitions are also in line with the FATF standards:
• Bookkeeping services are defined as the recording, organising and data entry of financial
  transactions on behalf of another legal entity or person; and 6 https://www.fsc.gi/uploads/VASP%20Registration%20Scope%20Guidance%20Note%20v1.0.pdf

Gibraltar Financial Services Commission VASP Registration Scope Guidance Note 3

• Accountancy services are defined as the interpretation, analysis, classification, reporting and filing
  of financial information on behalf of another legal entity or person.
  Tax Advisors
  Since 2021 tax advisory firms have been required to register, and, the GFSC has determined that the following activities currently fall within the scope of the definition of “Tax Advisor”:
• Tax compliance work;
• Provision of tax advice;
• Succession advice; and
• Advice on investments and custody of client money.
  Out-of-Scope Activities
  There may be instances where an entity will not be required to register with the GFSC for these activities. These include:
• Entities that are already regulated for AML/CFT/CPF purposes and hold an existing authorisation
  with the GFSC or an equivalent local supervisory authority, are not required to register under the Regulations;
• Entities not engaging in the specified activities by way of business. The Regulations do not capture
  individuals who are not carrying out the activities in return for remuneration;
• In-house accountants, for example, employees who are providing accountancy or tax advisory
  services to the entity they are employed by or an entity at which they are a director or officer;
• Where the payroll services offered are limited to the following services:
  o The provision of software or hardware service support for payroll data processing, as long as it does not include the analysis or preparation of financial information; o The payment of invoiced service fees to self-employed people, umbrella companies, partnerships or other corporate service providers; o The carrying out of payroll functions for employees who are working on assignments for an end-user client; and o The provision of recruitment or human resources management services and carrying out payroll functions as a small part of the main business activity. Red Flags and Typologies When assessing a customer for ML/TF/PF purposes, it is imperative that registered entities understand how the customer may use the entity to facilitate financial crime and the different risks these customers pose. The GFSC considers that certain activities, products and services pose a higher level of AML/CFT/CPF risk relevant to the accountant and tax advisor sectors. These include but are not limited to:
  Red Flag/Typology Risk
  Cash Intensive Businesses The use of cash and favouring the use of cash over card payments. This makes the accountancy sector vulnerable to the facilitation of trade-based ML on the basis that it is relatively easy to falsify invoices and receipts for payments that do not exist. It is imperative when conducting transaction

Gibraltar Financial Services Commission VASP Registration Scope Guidance Note 4 monitoring that the types of invoices/receipts provided corroborate with the size/nature of the business. Opaque/Complex Structures Using multiple entities with the same beneficial owner is a method used to launder funds. These entities invoice each other for goods or service charges which are not legitimate. This then creates an avenue for funds from illegitimate activities to enter the financial system. Unexplained complex transactions Transactions that involve multiple layers, intermediaries or jurisdictions without a clear business rationale. Transactions with related entities that lack transparency Payments or asset transfers to related parties (e.g., subsidiaries, affiliates) that are not clearly disclosed. In addition to the potential red flags and typologies listed above, registered entities should be aware that aggressive tax practices and tax avoidance schemes may increase the risk of financial crime. These practices can facilitate opaque and complex payment structures, which can be exploited to disguise illicit funds or facilitate their integration into the financial system. A non-exhaustive list of potential scenarios that may increase the level of ML/TF/PF risk has been included below. Scenario Risk Gibraltar registered companies not in receipt of chargeable income. There is a risk of double non-taxation arising from "brass-plating", creating reputational risk for the jurisdiction and leading to a perception in which the jurisdiction is actively used in aggressive tax planning and harmful practices. Gibraltar registered company entirely dependent on shareholder support to be a going concern. The commercial rationale of sustaining the company should be determined. Typically, such companies are present in tax efficient structures and serve to circumvent tax liabilities through various means, including but not limited to, any one of either an accumulation of losses, restructuring income streams through corporate layers or an accumulation of capital reserves pending liquidation.

Gibraltar Financial Services Commission VASP Registration Scope Guidance Note 5 Published by:
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