Do I need client consent to change file retention periods?

“We currently keep files that fall under the Money Laundering Regulations for seven years. We plan to change the file retention period to six years. Do we need client consent?”

Many practices will wish to keep the complete file of papers, including customer due diligence (CDD) records, for more than the five years specified in regulation 40(3) of the Money Laundering Regulations 2017.

For example, your practice's retention policy may specify longer retention times to take account of the expiry of limitation periods for potential negligence actions against the practice.

You must get client consent if there is any variation on the five-year period set out in regulation 40(3).

This consent clause may be contained in your engagement letter or terms of business. It should be signed or otherwise acknowledged by the client.

Regulation 40(3) sets out that you must retain the records for five years beginning on the date on which you know, or have reasonable grounds to believe:

1. “that an occasional transaction is complete, or
2. that the business relationship has come to an end for records relating to:
3. any transaction which occurs as part of a business relationship, or
4. CDD measures taken in connection with that relationship”
   1. that an occasional transaction is complete, or
   2. that the business relationship has come to an end for records relating to:
      1. any transaction which occurs as part of a business relationship, or
      2. CDD measures taken in connection with that relationship”

You are not required to keep the records relating to a transaction that occurred as part of a business relationship for more than 10 years.

On expiry of this period, you must delete any personal data unless you:

• are required to retain the data by another enactment or rule made by your regulator
• are required to retain the data for the purposes of any court proceedings, or
• have reasonable grounds for believing the records contain personal data that needs to be retained for the purposes of legal proceedings

For more information, see chapter 10 of the anti-money laundering guidance for the legal sector.