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Treasury confirms new changes to UK money laundering regulations

  • United Kingdom
  • Fraud and financial crime

17-06-2022

The UK government has published its response to the consultation on reform of the UK AML regime, and clarified what changes we should expect to see in the next few months. Ruth Paley, Victoria Turner and Phil Taylor take a look at the highlights.

The consultation, launched by HM Treasury in July 2021, invited views and evidence on a number of proposed changes to the Money Laundering Regulations 2017. According to the government, 94 responses were received during the consultation period from a wide range of respondents including anti-money laundering and counter terrorism financing (“AML/CTF”) supervisors and members of the private sector.

The HM Treasury consultation response paper (which can be downloaded in PDF format here) sets out a number of proposed changes to the MLRs, many of which are due to come into effect on 1 September 2022. These include, among others:

• removal of Account Information Service Providers (“AISPs”) from the scope of the MLRs, while keeping Payment Initiation Service Providers in scope – AISPs are regarded as low risk for money laundering as they do not come into direct contact with customers’ funds

• introducing a power for AML/CTF supervisors to access, view and consider the quality of suspicious activity reports (“SARs”) submitted by those they regulate – this is expected to help standardise the approach to SARs and assist supervisors to obtain and identify better intelligence relevant to their sectoral risks

• a number of changes relating to proliferation financing (“PF”) risk, including adding a definition of PF to the MLRs and requiring PF to be included in relevant persons’ risk assessment processes – this will allow the UK to implement international standards set by the Financial Action Task Force in this area

• expansion of the obligation for relevant persons (under Regulation 30A of the MLRs) to report discrepancies in beneficial ownership information so that this will also cover ongoing customer due diligence on existing business relationships, although only ‘material’ discrepancies must be reported – guidance will also be provided on what amounts to a ‘material’ discrepancy

• expansion of the information sharing gateway provided for under Regulation 52 of the MLRs to expand the list of relevant authorities included and to allow for reciprocal sharing from law enforcement to AML/CTF supervisors – changes will also be made in relation to the information gathering powers of the FCA, increasing the burden on Annex I institutions; and

• a number of crypto-related changes.

Notably, the government has decided not to implement any changes to the MLRs to clarify the activities that make a relevant person a ‘financial institution’ as per Regulation 10 of the MLRs, aligning the MLRs with the Financial Services and Markets Act 2000. Noting that the work needed here would be “especially complicated and technical”, the government has deferred this change to a later (as yet unspecified) time.

A separate and much broader review of the UK’s anti-money laundering and counter-terrorism financing regimes is ongoing, with the results of that consultation process also due for publication this month. Those operating in the regulated sector should continue to keep a close watching brief for further developments.