The consultation is aimed to make "time-sensitive" and limited updates to the Money Laundering Regulations ("MLRs") while the call for evidence is seeking a wider review of the UK’s AML/CTF regulatory regimes.
The closing date for comments on both is 14 October 2021 with a report from the consultation due 26 June 2022, and new statutory instruments to be laid in spring 2022. Any persons responding to both should clearly demarcate which document they're responding to; responses are requested to be submitted electronically. Full lists of questions can be found in Annexes to each document.
The Home Office is also set to consult shortly on legislative proposals related to economic crime.
This post summarises some of the main questions HMT has posed for input in both the consultation and the call for evidence.
Consultation on Amendments to MLR Statutory Instruments (SIs)
Proposals for Exclusion/Changes to Definitions
The MLRs cover certain sectors (the regulated sector) including chiefly, financial institutions. The consultation is seeking input on whether to exclude the following entities from the regulated sector:
- Account information service providers and payment initiation service providers
- Bill payment service providers and telecoms, digital and IT payment service providers
- Individual artists selling their own works
Entities which undertake other regulated activity in the MLRs would still be required to maintain appropriate policies, controls and procedures for that activity.
The consultation also seeks views on the merits of updating the activities that qualify an entity as a credit and financial institution - in particular to align with the Financial Services and Markets Act 2000 (FSMA), and on extension of the terms "trust of company service provider" (TCSP) and "business relationship" for services provided by TCSPs.
Clarifications to strengthen supervision/Expanded requirements to strength the regime
The consultation seeks views on whether to explicitly allow AML/CTF supervisors to view the content of suspicious activity reports (SARs) by requesting SARs from members of their supervisory population (it would not allow access to SARs through the UK FIU).
The consultation also proposes amendments to include proliferation financing (PF) in the MLRs and require relevant persons to undertake a PF risk assessment.
Information sharing/Beneficial ownership reporting
The MLRs require reporting of discrepancies in beneficial ownership information to Companies House, before establishment of the business relationship. The consultation seeks input on whether the obligation should be ongoing throughout CDD.
The MLRs permit disclosure or sharing of intelligence to certain relevant authorities - the consultation seeks input on whether to expand the scope of relevant authorities (e.g. to BEIS) and whether to give the FCA more flexible information gathering powers.
The Government proposes to amend the MLRs in order to better regulate cryptoasset firms and the transfer of assets, including requirements to include additional information on the originator and beneficiary of transfers meeting certain thresholds.
Call for Evidence
HM Treasury states it intends to evaluate three overall themes in its review:
1) overall effectiveness of the Money Laundering Regulations and Office for Professional Body Anti-Money Laundering Supervision (OPBAS) Regulations 2017) regimes,
2) their extent (i.e. the sectors in scope as relevant entities), and the application of particular elements of the Regulations to ensure they are operating as intended, and
3) the structure of the supervisory regime, and the work of OPBAS to improve effectiveness and consistency of Professional Body Supervisor (PBS) supervision.
Some of the questions HMT poses to evaluate these themes include:
- whether the MLRs focus on the right objectives and whether there are any other "high impact" activities to consider including and what should instead be considered "low impact"
- how to incorporate the Strategic National Priorities
- evidence of whether the MLRs have been effective in achieving objectives
- what evidence and factors should be considered to include or exclude certain sectors
- whether the MLRs provide sufficient and proportionate enforcement powers and whether they are effectively dissuasive
- barriers to understanding the "risk-based approach" and how to improve understanding of ML/TF risks in the regulated sectors, including the usefulness of current guidance
- improvements to SARs regime
- expectations of supervisors as gatekeepers, whether they appropriately evaluate risk-based compliance programmes, and challenges to the structure of the supervisory regime, including any supervisory gaps
- feedback and examples on the operation of enhanced due diligence, simplified due diligence and reliance
- effectiveness and remit of OPBAS
Please contact us if you have any questions about the scope of the MLRs and/or the government's current proposals.
Money laundering can undermine the integrity and stability of our financial markets and institutions. It is a global problem and represents a significant threat to the UK’s national security. Money laundering is a key enabler of serious and organised crime, which costs the UK at least £37 billion every year1. The NCA assesses that is highly likely that over £12 billion of criminal cash is generated annually in the UK and a realistic possibility that the scale of money laundering impacting on the UK (including though UK corporate structures or financial institutions) is in the hundreds of billions of pounds annually.