March 12, 2024 Money Laundering consultation launched
Whatever you think of anti-money laundering measures, they are a key counter-terrorist measure which, if applied properly, could help to reduce the scale of criminal activity in the UK. And when you consider that, according to the National Crime Agency, the scale of money laundering impacting on the UK amounts to hundreds of billions of pounds annually, that impact on the UK economy and lives is considerable.
With this in mind, and following a review of anti-money laundering measures in 2022, on 11 March 2024 the Government launched a consultation on improving the effectiveness of the current legislation which was drawn up in 2017. The 2022 review found that whilst the core regulations were mostly fit for purpose, some aspects could be improved in order to improve outcomes for both businesses and legitimate customers.
Current regulations impact some 100,000 businesses ranging from micro-entities to large international concerns. The regulations take this wide range of entities into consideration by requiring a risk-based approach which can vary not only across firms but also across customers and transactions within firms. Maintaining that risk-based approach the new consultation aims to introduce changes with a view to:
- Making customer due diligence more proportionate and effective. Considerations here include whether customer due diligence triggers are sufficiently clear, whether the guidance on source of funds needs strengthening, digital identities, and whether risk factor guidance needs to be enhanced.
- Strengthening system coordination. Questions here cover areas such as expanding information-sharing across public bodies and changes to information-sharing gateways to support wider coordination. There also appears to be some concern on whether individual firms have sufficient information to enable them to draw up and use MLR risk assessments including being aware of potential sources of information.
- Providing clarity on the scope of Money Laundering Regulations. Key amongst areas of concern here are the challenges which can arise when dealing in multi-currencies or crypto-assets.
- Reforming registration requirements for the Trust Registration Service. This more specialist area primarily looks at strengthening registration requirements for land ownership by trusts and the two-year exemption currently in place for temporary trusts created as a means of distributing property left in a will.
The consultation runs until 9 June 2024 with the Government looking for responses from a range of businesses affected. In the meantime, it might be worth considering a warning issued by the FCA on 5 March to Annex 1 firms; those firms which are regulated by the FCA in respect of money laundering compliance but not in respect of other activities. This highlighted four common failings, listed below, and required all Annex 1 firms to review and strengthen their processes in these areas within six months.
- Discrepancies between firms’ registered and actual activities.
- Financial crime controls which had not kept pace with business growth.
- A failure to risk assess their own or their customers’ activities properly.
- Inadequate resourcing and oversight of financial crime issues and requirements.
