Recruiters could face five-year prison sentences if they fail to report money laundering under tough new rules, a recruitment trade body has claimed.

The Association of Technology Staffing Companies (ATSCo) has posted guidance to members on the money laundering regulations 2003 on its website after receiving queries from members. The legal position of staffing companies under the regulations is far from clear and, so far, there is no case law.

Although the chief focus of the legislation is on accountants, lawyers and dealers in high value goods, the penalties involved are harsh – a possible five years in prison for failure to report – and some agencies may be caught out.

The Association’s chief executive Ann Swain said: “We have taken QC advice and we are not a regulated industry.

“But certain members will need to look at their own internal processes, especially the electronic transfer of funds.”