Author: Niall Hearty
10 August 2021
4 min read
Niall Hearty of Rahman Ravelli details HM Treasury’s consultation on its proposals to alter the money laundering regime.
HM Treasury has begun an exercise to take views and evidence on the steps that the government intends to take to amend the Money Laundering Regulations 2017, as amended (MLRs).
These amendments are necessary for the UK to continue to meet international standards set by the Financial Action Task Force (FATF) and to bring clarity on how the anti-money laundering regime operates, following feedback from industry and supervisors on the implementation of the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.
The consultation and the concurrent Call to Evidence concern possible amendments to some aspects of the MLRs . These include the scope of the regulated sector to exempt particular payment service providers that may present a low risk of money laundering and terrorist finance.
The consultation also looks to strengthen supervision by making amendments to the suspicious activity reports (SARs) regime and by including the formation of a partnership within the scope of what can be classed as a ‘business relationship’. There are also proposed amendments in relation to the transfer of crypto assets and provisions related to information gathering and sharing by supervisors.
On 22 July 2021, the Treasury published a Call for Evidence on a review of the UK’s anti-money laundering (AML) and counter-terrorist financing (CTF) regulatory and supervisory regime. It also published a Consultation Paper on amendments to MLRs, which are the UK’s main AML and CTF legislation. These amendments are set to be made via statutory instrument in Spring 2022. But the review will not cover related legislation, such as the Proceeds of Crime Act 2002 or the Terrorism Act 2000.
The Call for Evidence was prompted by the UK’s post-Brexit ability to set its own AML and CTF standards, as well as the government’s 2019 Economic Crime Plan, which said that the Treasury had to review the MLRs. The MLRs themselves require the Treasury to review them, with publication of the first review having to be made by 26 June 2022.
The Call for Evidence will review the overall effectiveness of the MLRs by assessing the effectiveness of the system, including an examination of the impact of the implementation of the EU’s Fifth Money Laundering Directive into UK law in January 2020. It will also assess whether the scope of the regulations remains in proportion to the scale of the risk posed by various sectors, whether the use of current enforcement powers is proportionate, the value of Treasury-approved guidance and the effectiveness and appropriateness of the supervisory regime structure.
In short, it aims to determine whether the main aspects of the regulations are operating as they were intended to, whether any changes are required and whether they are capable of ensuring the safe, effective use of current and future technology to combat money laundering and terrorist financing. The Call for Evidence also aims to assess whether new legal obligations should be placed on supervisors, such as the FCA, to enhance the effectiveness of SARs. The 2018 Mutual Evaluation of the UK by FATF raised concerns about the quality of SARs submitted in the UK and the use of intelligence gained from them.
The Consultation Paper considers measures to:
The government is receiving comments on this consultation until 14 October 2021 but encourages responses to be made before this date where possible.
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