CCIA Compliance Reports - Lambeth Pound by Local Money

Legal and compliance analysis of the Lambeth Pound Organisation: London Borough of Lambeth This guidance document describes the impact of relevant laws and regulations in the United Kingdom on the Lambeth Pound project. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation. This document is part of a wider package of legal and compliance documents that can be found on the Community Currency Knowledge Gateway at http://community-currency.info/en/find/cc-toolkits/legal-and-compliance/

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Disclaimer This document only offers an overview of the legal landscape that this complementary currency operates within and nothing contained in this document should be considered legal advice.

This report has been compiled and verified by Qoin as part of the Community Currencies in Action (CCIA) collaboration project. CCIA is a transnational partnership project designing, developing and implementing community currencies across northwest Europe. The partnership provides a rigorously tested package of support structures to facilitate the development of currency initiatives across NWE, promoting them as credible policy vehicles. Running from May 2012 to June 2015, CCIA is part-funded through the INTERREG IVB North West Europe Programme, a financial instrument of the European Union’s Cohesion Policy ‒ Investing in Opportunities. Find out more about CCIA on our website: www.communitycurrenciesinaction.eu

Introduction This guidance document describes the impact of relevant laws and regulations in the United Kingdom on the Lambeth Pound project. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation. Each chapter is divided in main and sub legal topics. An explanation is given for each main and sub topic. For each legal topic a description is given about how its relevant to the Lambeth Pound currency project.

Legal Topics 1. Taxation Tax authorities and regulators can consider community currencies to be a means by which individuals and companies can more easily escape the tax implications of the transactions that they engage in. It is therefore vital that any community currency seeks to mitigate these legitimate concerns by addressing the impact on VAT, Corporation tax and Income tax of individuals and companies using the scheme. For example, in the Netherlands a ruling has been obtained from the tax authorities that currency earned through social currency schemes are not taxed up to the equivalent of a maximum annual remuneration of volunteers up to €1500. However the situation varies in the different NWE countries and for some similar policies are yet to be. A further challenge is designing a calculation model which allows for computing equivalent legal tenders for currencies that are circulated on a completely different basis such as ‘hours’. To maintain the integrity of the community currency programs CCIA will do an indepth risk analysis to understand how to mitigate the possibility of users avoiding paying all the tax due to the authorities. An initial assessment is, that social currencies (e.g. Timebanking, loyalty schemes etc.), due to their relatively limited scale in terms of individual balances and individual earnings, and spending opportunities, in general have a low risk of tax avoidance by users. For currencies in the professional/b2b mutual credit and legal backed tender, where the potential risks are higher, measures have already been implemented to verify the identity of participants when they enter the scheme. 1.1 Value Added Tax (VAT) The Lambeth Pound is classed as a credit face value voucher for tax purposes, since they are sold at face value and redeemed for real goods and services. There is no VAT due on the actual sale of the vouchers since they are sold at face value, but there is VAT due from the businesses that redeem these vouchers. When the vouchers are used/redeemed for goods and services, the value for VAT purposes is the full face value. Businesses that sell Lambeth Pound vouchers cannot claim VAT on the sale of the vouchers, because they are sold at face value. The only time that VAT could be charged on the sale of Lambeth Pound vouchers is if they were sold for a greater amount than their face value – for instance, if a collectors pack was sold for a higher rate than the value of the vouchers. This would then be VAT rated. However, if the turnover of the organization is less than £77,000 per year, the business does not have to be VAT registered. If the Lambeth Pound were to sell

collectors packs, we would not need to charge VAT since Lambeth Council is not liable for VAT. To encourage compliance with VAT law, we notify all businesses who accept Lambeth Pounds that normal tax is due on all goods and services they sell for Lambeth Pounds. Additionally, we notify any businesses who are exchanging sterling for Lambeth Pounds as a service that they are not able to charge VAT for face-value Lambeth Pounds. Since VAT must be paid in sterling, businesses must make enough sterling (or trade back enough Lambeth Pounds into sterling) to pay for the VAT they owe to HMRC. Links to original law texts and contact details regulatory authorities relevant for this sub topic: - Business promotion schemes, 700/7 (2012) http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_ nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000091&propertyTy pe=document#downloadopt 1.2 Corporation tax As the Lambeth Pound is a project inside Lambeth Council, it is not responsible for paying tax as a separate body, and makes no overall profit so there is no corporation tax to be paid on this demonstration. When the Lambeth Pound breaks away from Lambeth Council, it will be set up as a Community Interest Company, which will be responsible for paying tax. As a limited company a CIC is liable to corporation tax just like any other company. We notify all limited companies and other organisations including clubs, societies, associations and other unincorporated bodies who accept Lambeth Pounds that they must pay corporation tax on their income whether it is in Lambeth pounds or in sterling. This also applies to self-employed people and business partnerships. We inform businesses that accept Lambeth Pounds that they are responsible for the tax liability incurred in earning any income, including Lambeth Pounds. There are several relief categories that reduce the amount of corporation tax some businesses pay, but none exempt income earned in local currency. Corporation tax must be paid in sterling, and businesses must ensure that they make enough sterling (or trade enough Lambeth Pounds into sterling) to pay their corporation tax to HMRC. Links to original law texts and contact details regulatory authorities relevant for this sub topic: CTM40145 - Particular bodies: clubs: community interest companies http://www.hmrc.gov.uk/manuals/ctmanual/CTM40145.htm Indroduction to Corporation tax: http://www.hmrc.gov.uk/ct/getting-started/intro.htm Who is subject to Corporation Tax requirements? The following limited companies and unincorporated organisations are subject to Corporation Tax requirements:

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limited companies incorporated in the UK foreign-based companies with a permanent place of business in the UK members' clubs, such as social clubs, sports clubs and holiday clubs societies, such as friendly societies and provident societies associations, such as housing associations and trade associations co-operatives other unincorporated associations groups of individuals carrying on a business that is not a partnership charities, or companies that are subsidiaries of - or wholly owned by - a charity NHS foundation trusts if they are carrying out significant commercial activities that are not part of core health care delivery, such as running a commercial laundry

The taxable profits or surpluses of these businesses and organisations are subject to Corporation Tax requirements. A company or organisation subject to Corporation Tax requirements is known to HMRC for Corporation Tax purposes as being 'within the charge to Corporation Tax', 'chargeable to tax' or in 'the charge to tax'. 1.3 Income tax Lambeth Council pays staff who work on the Lambeth Pound/CCIA programme, and is therefore responsible for paying employment tax on these workers’ salaries. Salary payment and employment tax payment is made in sterling. There is a scheme which allows Lambeth Council employees to opt in to earn some of their salary in Lambeth Pounds. Currently, this scheme operates by converting a specified portion of employees’ salaries into Lambeth Pounds after they are paid. The conversion happens after tax is already taken out of employee pay. In the future, however, this specified portion will be paid directly in Lambeth Pounds. This salary will then be taxable as per the explanation below. For businesses that accept Lambeth Pounds, there are two types of income tax considerations: tax paid by businesses on workers’ salaries, and self-employment tax paid by sole traders and business partnerships. For employed people (rather than self-employed people), we believe Lambeth Pounds are classed as ‘non-cash voucher which is a readily convertible asset.’ While Lambeth Pounds cannot officially be converted into sterling by individuals and the goods/services that they employee can purchase with the Lambeth Pounds would also not be classified as ‘readily convertible assets’, we believe that Lambeth Pounds themselves are readily convertible. That is, Lambeth Pounds can be traded and transferred between individuals, hold value, and can be converted to sterling informally (for instance, through the transfer of Lambeth Pounds to a friend who reimburses the giver with sterling). This means that PAYE tax is due on any salry earned in Lambeth Pounds. This is not a closed subject and there is reasonable legal debate over whether credit vouchers are non-readily convertible or convertible assets, as described by Simon’s Taxes at E4.1124 explains what these are. “A readily convertible asset is any of the following:

(5) An asset for which trading arrangements are in existence, or are likely to come into existence, in accordance with other arrangements or understandings at the time the asset is provided. “‘Trading arrangements’ exist in respect of an asset provided for a person where their effect is to enable that person (or a member of his family or household) to obtain an amount or total amount of money for this purpose which is likely to be similar to the expense incurred in providing the asset. A person can obtain an amount of money if he can obtain it by any means at all, in particular: (a) by using it as security for a loan or advance; (b) by using rights in or attached to an asset to obtain another asset for which trading arrangements exist; (c) if he is enabled to obtain an amount as a member of a class or description of persons.” Businesses that pay employees in Lambeth Pounds as part of their regular salary must pay PAYE tax in sterling, just the same as when a self-employed person or partnership pays tax. For self-employed people, all income must be reported to HMRC, regardless of whether this income was earned in sterling or in Lambeth Pounds. Some sole traders/self-employed people will be VAT registered. Like other types of businesses, any VAT that is due to HMRC will be due in sterling. Links to original law texts and contact details regulatory authorities relevant for this sub topic: http://www.taxation.co.uk/taxation/Articles/2013/05/01/306701/voucher-bonus Opinions and guidance on vouchers, PAYE, and status as a readily convertible asset. HMRC Def of ‘credit-tokens’: http://www.hmrc.gov.uk/manuals/eimanual/EIM11850.htm http://www.hmrc.gov.uk/manuals/eimanual/eim11845.htm PAYE on non-cash vouchers HMRC Definition of a ‘readily convertible asset’: http://www.hmrc.gov.uk/manuals/eimanual/EIM11900.htm http://www.hmrc.gov.uk/incometax/basics.htm Income Tax – The Basics

2. Insurance Under this topic there are 2 sub-topics that will be investigated. Firstly the impact on volunteers engaging in work on behalf of the currency operator and related need for insurance. Secondly how the governance board will be indemnified against major risks.

In some cities/municipalities citizens engaging in volunteer work are covered by a municipal (accident/disability) insurance policy. There are, however, many municipalities where this not the case. The CCIA partnership assessed this for all programs we develop, and, where necessary, negotiate favorable terms with insurance companies to provide coverage in the event no city-wide volunteer insurance exists. Companies, charities, foundations and other entities (either profit or non-profit) who seek to introduce a currency scheme will need to consider the issue of potential liability of governance board members in the case of default, bankruptcy or other eventualities. In some countries (e.g. NL), insurance products for this type of liability are available (as long as the liability is not a result of e.g. illicit activities). For insurance companies the risks involved in running a community currency scheme may not be straightforward to assess, which means a negotiation can be required to agree upon the appropriate insurance policy. 2.1 Volunteer insurance (accident/disability) All volunteers for the Lambeth Pound are covered by Lambeth Council’s public liability insurance policy, as stated below: “If you are an employee of Lambeth then you are covered by the council’s public liability policy whilst you are in performance of your official duties. There are some exceptions to this such as where an employee is acting illegally or is acting outside of their official duties, i.e. without the authorisation or knowledge of the council. An employee of Lambeth also includes anyone hired from an employment agency or who is issued with a temporary contract of employment or is working as a volunteer. Self-employed consultants who are filling a vacant or new post, are also classed as an employee and are covered by this policy” When the Lambeth Pound is run by a CIC, it will be responsible for organizing separate public liability insurance to cover staff and volunteers. Links to original law texts and contact details regulatory authorities relevant for this sub topic: The Lambeth Council Risk and Insurance team, headed by Ms Maureen Dennie, has confirmed our position in regards to volunteer insurance and protection of deposits. 2.2 Liability of board Currently the governance board is not separate from Lambeth Council, so Lambeth Council bears responsibility in the event of a default or bankruptcy. However, the sterling reserves are kept in a traditional bank, so these reserves (and therefore the financial structure of the currency) is protected by the bank’s insurance. The loss of paper vouchers is covered by Lambeth Council’s existing insurance, provided that the paper vouchers are stored in a secure way, in locked drawers in a locked room or inside a safe. There is also fidelity insurance which protects the Council from any fraud committed by employees, such as theft of currency or reserves.

This has been confirmed for us by Ms Maureen Dennie, Insurance Manager for Lambeth Council. Links to original law texts and contact details regulatory authorities relevant for this sub topic: The Lambeth Council Risk and Insurance team, headed by Ms Maureen Dennie, has confirmed our position in regards to volunteer insurance and protection of deposits. Documents explaining the status of insurance are held internally at Lambeth Council.

3. Labor law One of the main target groups for social currencies are vulnerable an excluded strata of society, such as people with disabilities, the unemployed and people in deprived communities generally. Many of the people that can be (re)engaged and could participate in a social currency scheme are recipients of government/municipal welfare or (unemployment) benefits. For them to safely participate it is important that a dialogue is started and rulings are obtained on the potential impact of participation in social currency schemes from the relevant national and local authorities in the countries in which we implement them. 3.1 Social security If individuals receive Lambeth Pound as earnings, it impacts on any benefits they receive. Therefore, they need to be aware that Lambeth Pound is a source of income and must be declared. If individuals receive Lambeth Pounds for their voluntary participation in community activity they will be treated as notional earnings : ‘The benefits system treats rounded up expenses as earnings and some other non-cash payments such as vouchers as notional earnings or actual earning. The volunteer would be treated as in paid work and their earning will be taken into account against their benefits which may affect benefit payment. Rounded up expenses may also be treated as earnings by HM revenue and customs’ Therefore anyone receiving Lambeth Pounds on a regular basis whilst in a voluntary capacity needs to be aware this payment could be treated as notional earnings and impact any benefits they receive. One-off gifts in local currency will not affect any benefits nor be described as payment for work under the Minimum Wage Act. Guidance for Council Officers on the use of Lambeth Pounds to recognize social participation will make a distinction between one-off and ongoing payments and the need to communicate to any participants the potential impact on their benefits. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Department of Health, Reward and Recognition Guidance, 2010: Voluntary involvement and the benefits system

52. Service users involved on a voluntary basis are likely to be involved alongside other service users who are being paid for involvement. Those involved on a voluntary basis are strongly advised to contact Jobcentre Plus to ensure that they will not attribute what is known as “notional earnings” for volunteers. The concept of notional earnings is to safeguard employers exploiting volunteers and is not usually used in this context, but volunteers should be aware of it. Expert welfare rights advice should be offered if necessary. (See also section 8 Consultation with Jobcentre Plus and the HM Revenue and Customs for further information) 53. For service users on benefits where involvement is not paid and is voluntary, most expenses can be safely reimbursed. It is however important to reimburse only actual expenses. If the amount is rounded up or a notional amount is set (e.g. a standard £10 for ‘expenses’ per meeting) or people are given vouchers or small gifts two problems may arise: • The benefit system treats rounded up expenses as earnings and some other noncash payments such as vouchers as notional earnings or actual earnings. The volunteer would be treated as in paid work and their earnings will be taken into account against their benefits which may affect benefit payment. Rounded up expenses may also be treated as earnings by the HM Revenue and Customs. • The Minimum Wage Act states that voluntary workers (who are exempt from the Minimum Wage) “receive no benefits in kind” – if benefits in kind (such as rounded up expenses, vouchers and small gifts) are provided to voluntary workers the employer could be found liable to pay the National Minimum Wage. • All those claiming Incapacity Benefit, Income Support and Jobseekers Allowance should complete a JCP VOL1 form from their Jobcentre Plus. This includes questions on choice to receive payment/reward. • Service users who receive incapacity based benefits may prefer to keep their involvement to under 16 hours a week. Voluntary work for 16 hours or more a week in some circumstances has been known to lead to Jobcentre Plus triggering a review of incapacity. One-off gifts 54. Sometimes service users want to be involved for a particular event or brief activity such as consultations, attendance at seminars or conferences. Providing this is a genuine “one off ” arrangement, and the service user is not employed by the organisation, it is possible to provide a cash gift in appreciation. This is similar to the practice that some market research companies use for example when engaging members of the public in a survey etc. Providing the gift is made voluntarily and not in payment for work, and is within the capital rules for income support, income based job-seekers allowance and Pension Credit, it will not affect any benefits nor be described as payment for work under the Minimum Wage Act. 3.2 Unemployment and disability benefits An individual receiving disability living allowance would not be able to earn Lambeth Pounds in the same way they might earn Time Credits on a regular basis. They would only ever be able to receive Lambeth Pounds as a one off thank you for participation. Beyond this, payment in Lambeth Pounds could be counted as notional

earnings. Any individual in receipt of disability benefits should discuss any changes in activity (volunteering etc) with their employment advisor. 3.3 Employment Terms The Lambeth Pound does provide the possibility for people to earn part of their wages in local currency. This is strictly by an opt-in mechanism, and no one is forced to receive salary payments in local currency if they do not want this. Some businesses may pay workers directly in local currency, while others will pay in sterling and convert to local currency as a convenience. This is addressed in the section about taxation. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Please see the section on taxation.

4. Privacy and safety Data protection is an important topic for most network services. Within CCIA project partners are responsible for formulating and implementing privacy policies to protect sensitive user data. The safety protection of individuals is embedded in several legal texts. We show how these apply to the selected currency types. For example do we deal with registered offenders who want participate in currency programs? In addition there are specific regulations for working with the elderly and children. 4.1 Safety/Protection of (vulnerable) CC users We fulfill general data protection requirements, which pertain to the ways that we keep people’s personal information. There are no restrictions on who can use Lambeth Pounds; however, we have a current policy that limits unrestricted electronic accounts to users aged 16 and over. Children and young people under the age of 16 are able to use restricted electronic accounts that are connected to other unrestricted accounts (‘parent’ and ‘child’ accounts). This is based on national trends to offer young people aged 16 and older greater independent control over their finances. We are able to link any accounts as ‘parent’ and ‘child’ accounts, so at the request of particular individuals we could create a ‘child’ account for a vulnerable user of any age. This would need to be in line with privacy policies and policies to reduce the risk of financial abuse towards vulnerable people. We do not do any direct service provision to young people or older people without social work staff present who have Criminal Records Bureau checks, which allow people to work with children and vulnerable adults. Beyond this, we do not actively undertake any controls to promote the protection of vulnerable Lambeth Pound users – for instance, we do not regulate the types of products that can be bought with Lambeth Pounds, so users are able to buy alcohol and cigarettes with Lambeth Pounds in some venues with unrestricted accounts. Links to original law texts and contact details regulatory authorities relevant for this sub section:

CRB checks to work with young people: https://www.gov.uk/disclosurebarring-service-check Financial abuse information: http://www.scie.org.uk/publications/reports/report49.asp Safeguarding vulnerable customers guidance available from the BBA (British Bankers Association)

4.2 Data storage and protection All organisations that hold data are required to register with the Information Commission Office. Lambeth Council is registered, and the borough leads for data protection is Ian Goodwin, who is the Information Governance Manager. The Lambeth Pound complies with relevant data protection legislation. We are transparent about how data will be used, we collect only relevant data and delete users’ data if they decide to leave the scheme. We endeavor to keep users’ data up to date, and will change information that users tell is incorrect. Users may request information about the data we hold on them. In most cases, users will be able to self-administrate the data our system holds, and can choose whether they want to enter or update additional information that is nonessential to the service’s operation. We will not hold paper copies of users’ bank accounts or contact details. Data will be password-protected, and account administrators will only have access to the data they need to administrate accounts. Signed copies of business agreements will be kept in a secure location, and businesses are able to request copies of these agreements. Links to original law texts and contact details regulatory authorities relevant for this sub topic: http://www.ico.org.uk/for_organisations/data_protection/security_measures

5. Financial service regulations Any organization that prints physical ‘money’, or vouchers, makes electronic monetary units available, that are convertible into legal tender or is engaged in the provision of payment services will need to review how the relevant financial services regulations apply to their currencies and which enforcement bodies (Central Banks, National and international Finance institutions) need to be engaged with for compliance or exemptions. All countries have very strict laws restricting who can print money and currency operators will need to ensure that they do not contravene these rules. The provision of the electronic money directive and payment services directive only apply to those currencies that are not able to show that they operate in limited network. But more general rules and laws might apply, for example for the issuance of paper notes. 5.1 Issuing physical currency The current legislation in the UK states that only the Bank of England is able to print banknotes; therefore, we print credit face-value vouchers as stated above. Guidance from the Bank of has informed us that they advise printing an expiry date on all paper

vouchers. We are careful to identify the paper Lambeth Pounds as vouchers. There is no other current legislation that governs the printing of paper vouchers used as a local currency. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Local currency schemes often issue paper vouchers that have some similar physical characteristics to banknotes. However whilst the appearance of the vouchers are superficially similar to banknotes the legal form of a voucher is different from that of a banknote. Vouchers typically represent a pre-payment for goods or services from a specified supplier(s) and cannot be redeemed by consumers for cash. These are different to banknotes and the precise nature of the paper vouchers will typically be governed by terms and conditions which should make clear the status of the vouchers and the restrictions on their convertibility with Pound Sterling. http://www.bankofengland.co.uk/banknotes/Pages/localcurrencies/default.aspx 5.2 Digital currency non-convertible to national currency As a local authority, we do not need to get an e-money permit to issue e-money, but only to tell the FCA that we are going to issue e-money. However, we are exploring exemption from e-money issuing permits and reporting for the sake of the CIC which will operate the Lambeth Pound in the future. The FCA is still conducting research on this issue. 2.15 Other e Money issuers. “government departments and local authorities when acting in their capacity as public authorities; They will be subject to the conduct of business requirements of the EMRs, the conduct of business requirements of the PSRs for the payment service aspect, and they will have to report to us their average outstanding e-money on a half-yearly basis. Certain customers will have access to the ombudsman service.’ If this is the case we will have to fill out all of the relevant paperwork and reports for issuing e-money, but we do not have to actually get the permit. Our digital currency is non-convertible to national currency for non-business users. The legislation that exists regarding e-money does not differentiate between emoney that can be converted to national currency and e-money which cannot. We have made the rule with our currency to have non-business accounts be nonconvertible into sterling to limit the potential difficulties faced by people using the currency who also claim government benefits, and to limit the ways the currency can be used. These limits help to form our limited network exemption claim which makes us exempt from e-money permit requirements. We have currently sought guidance from the FCA, who regulates e-money, on our presumed exemption from e-money permit requirements. We base our presumption on the ‘limited network exemption’, which is because we operate our network in a limited area (within specific neighbourhoods in one London borough) and with a capped number of businesses. We do not hold deposits (i.e., we immediately convert pounds sterling into Lambeth Pounds upon receipt of the pounds sterling), Links to original law texts and contact details regulatory authorities relevant for this sub section: https://fshandbook.info/FS/html/FCA/PERG/15/5

“Q40. Which types of payment card could fall within the so-called "limited network" exclusion (see PERG 15, Annex 3, paragraph (k))? The "limited network" exclusion forms part of a broader exclusion which applies to services based on instruments that can be used to acquire goods or services only(a) in or on the instrument issuer's premises; or (b) under a commercial agreement with the issuer, either within a limited network of service providers or for a limited range of goods or services...". As regards (a), examples of excluded instruments could include: (1) staff catering cards - reloadable cards for use in the employer's canteen or restaurant; (2) tour operator cards - issued for use only within the tour operator's holiday village or other premises (for example, to pay for meals, drinks and sports activities); (3) store cards - where the card can only be used at the store's premises (so where a store card is co-branded with a third party debit card or credit card issuer and can be used as a debit card or credit card outside the store, it will still fall within the regulations). As regards (b), this exclusion has two discrete limbs and so applies either to instruments that can be used only: (i) within a limited network of service providers; or (ii) for a limited range of goods or services. In our view, examples of excluded instruments falling within (b) include: (1) transport cards - where these are used only for purchasing travel tickets (for example, the Oyster card which provides access to different service providers within the London public transport system); (2) petrol cards (including pan-European cards) - where these are issued for use at a specified chain of petrol stations and forecourts at these stations; (3) membership cards - where a card can only be used to pay for goods or services offered by a specific club or organisation; (4) store card - where the card can be used at a specified chain of stores at their premises or on their website. Instruments for the purpose of this exclusion can include, for example, vouchers and other devices. Q41. Do the regulations specify or define what a "limited network" is for these purposes? Neither the PSD nor consequently the PSD regulations provide any definition, conditions or criteria for determining what is a "limited network of service providers". The issue of whether or not a "limited network" is in existence is ultimately a question of judgement that, in our view, should take account of various factors (none of which is likely to be conclusive in itself). These include the number of service providers involved, the scale of the services provided, whether membership of the network is open-ended, the number of clients using the network and the nature of the services being offered. While a "limited network" could include transport cards, petrol cards, membership cards and store cards, we would not generally expect "city cards" to fall within this

exclusion, to the extent that these tend to provide users with access to a broad range of goods and services offered by a city's shops and businesses.” 5.3 Digital currency convertible to national currency (if applicable) Our digital currency is convertible to national currency for business users only, but as mentioned in the previous section this does not affect our overall compliance with existing legislation. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Please see the links and guidance in the previous section. 5.4 Money laundering Lambeth Council has an existing extensive money laundering policy that we are in compliance with. The existing Money Laundering Registered Officer is: David Hughes Deputy Chief Internal Auditor Internal Audit & Anti-Fraud Division 3rd Floor, Olive Morris House 18 Brixton Hill Brixton SW2 1RL Telephone: 020 7926 9892 e-mail: dhughes@lambeth.gov.uk If Mr. Hughes is not available, Michael O’Reilly, Benefit and Internal Investigations Manager, is authorised to deputise for him. Michael can be contacted at the above address or on telephone number 020 7926 2993 or via email to moreilly2@lambeth.gov.uk Procedure for disclosure of suspected money laundering is detailed in the policy, which emphasises that any discovery must be made as soon as is practicablewithin hours. In operating our currency, we ‘know our customer’ by asking for personal details when they create an online account. We verify this data by sending a test text message and/or by observing whether credits from their account happen properly. Generally, authorities must be notified of a suspicious cash transaction over £10,000. The Council’s internal limit for reporting suspicious cash payments is £3000. Links to original law texts and contact details regulatory authorities relevant for this sub topic: http://www.oft.gov.uk/OFTwork/aml/guidance#.UqBpHcoqL1U Money Laundering guidance and registration http://sharepoint.lambeth.gov.uk/sites/lts/InternalAudit/Public%20documents/Internal %20Audit%20and%20Anti-Fraud%20-

Â %20KEY%20DOCUMENTS/130112%20Money%20Laundering%20Policy%20and% 20Practice%20Note.pdf 5.5 Other central bank oversight regulations There are no current Bank of England oversight regulations that apply to the Lambeth Pound.

6. Acceptance of CCs by (local) government Being accepted in lieu of legal tender particularly by public entities is the goal of many CCs. Municipalities accepting local currencies for both services (swimming pool, public transport etc) and taxes (business rates, local taxes) gives CCs greater use value and credibility. However, especially in the Eurozone, those who tried to establish such spending possibilities in different countries encountered barriers of different kind, sometimes of personal nature (risk averseness) sometimes allegedly due to regional procedure regulations, state law or even EU law. 6.1 Acceptance of CCs for municipal services and taxes The Lambeth Pound has faced no legal challenges to acceptance for municipal services and taxes. The local government is currently working on full acceptance of local currency for business rates (business tax payments), business licences, and other municipal services. The only difficulty has come from systems integration, since there are complex systems that administrate the different business units/departments within local government, and some of these systems are outsourced to third parties. The key factor in local government acceptance of the Lambeth Pound has been taxfree convertability to sterling. While the Council hopes to recycle/recirculate most of the Lambeth Pounds accepted via Payroll Local (the salary payment scheme where Council officers can receive some of their salary in Lambeth Pounds), and via small contracts paid out in Lambeth Pounds, the safety valve of exchanging into sterling exists and allows the Council to take Lambeth Pounds without the worry of building up a supply that cannot be used. We have regular meetings with a range of business units/departments in the Council to discuss integration: finance, accounting, business rates (local business tax), legal, ICT, licencing, and parking. At these meeting, we assess risk and discuss procedure.

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