The UK Government’s New Consultation Aims To Improve Money Laundering Laws

Britain’s finance ministry on Monday came up with suggestions on how to relieve banks from anti-money laundering checks to reflect the effect of Brexit and the advent of new financial instruments like cryptocurrencies.

Baroness Vere stated that “there is always an opportunity for improving the efficiency of the regime” in the ministerial statement for the consultation, citing its necessity.

The consultation is a part of the general work programme formulated within the Economic Crime Plan 2023-26 and it is mostly about some already-identified problems with the anti-money laundering regulations of 2017.

Those might include the ones described in the 2022 Treasury’s Review of the Regulations casually named in the consultation. The assessment evaluates that the regulations’ fundamental criteria were largely appropriate; nevertheless, certain technological modifications may be implemented to improve efficiency and guarantee fairness for both customers and regulated businesses.

This consultation also received issues that are laid on the table by AML supervisors and regulated industries’ representative bodies among other key stakeholders. These were usually aimed at lessening the administrative workloads.

Four Key Areas To Focus

The government has marked four sections in its consultation on which “there might be a need to have more support” and “there might be the opportunity for other parties to function optimally together.” These focussed areas are:

Implement Balanced Customer Due Diligence

The consulting is directed at customer due diligence principles which speak about an exact risk approach through each case consideration. It reveals some concerns about certain companies’ efficiency in changing their due diligence patterns to different portfolios while at the same time being in control of highly complicated customers.

The government is required to deal with the uncertainties connected with the preconditions triggering the due diligence, checks reproduced for individuals acting on behalf of the customer, and the possible implementation of digital identity verifications. Aside from that, the consultation looks at when disclosure of the source of funds is required and enhanced customer due diligence measures are required.

Strengthening System Coordination

The session engages in building cohesion between the UK’s AML/CTF supervisory structure, placing emphasis on close supervision cooperation among regulated firms and supervisory bodies. It proposes possible enhancements to the information sharing system in regards to risks and threats, also suggesting some regulations that would be instrumental in improving coordination of the actions of international agencies, such as the option of the UK Financial Conduct Authority providing AML/CTF-related information to the Financial Regulators Complaints Commissioner while observing the privacy and the data protection.

Furthermore, the consultation explains, that Companies House­ has additional authority under the Economic Crime­ and Corporate Transparency Act, if this collaboration should also grow be­tween the re­gister of businesses and the supe­rvisors by broadening the applicable authoritie­s stated in rule 50.

Explanation Of Matters Of Scope And Registration

This section analyzes the delineation of the regulatory domains in which accountants are regulated since the latter are usually so regulated in specific areas. The major part of the paper deals with the uniform alteration of this currency at which all financial thresholds will be based as well as describing actors involved in Trust and Company Service Providers (TCSP). The consultation paper also looks into the ‘fit and proper’ register for cryptoasset service providers which is determined to be applicable.

Updating The Registration Criteria For The Trust Registration Services

The last part of the document deals with the possible changes to the Trust Treatment Service (TSR) rules. These amendments seek to offer more transparency for higher-risk trusts and ease of workload for low-risk trusts. These key focus areas include the enrollment of non-UK trusts without UK trustees, revolutionizing trust registration for estate management, and introducing a de minimis threshold for low-risk, non-taxable trusts only.

Another aspect that is foreseen in the consultation paper is that the regulation will include the provisions of the Scottish survivorship destination trusts making them exempt from the registration requirement.

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Insignificant Minor Adjustments

In the wake of yet another session of the Festival of Accounting and Bookkeeping where this Consultation is being discussed, David Winch from MLRO Support doubted that the Consultation could bring only minor changes to the MLR 2017.

“In terms of the government’s main strategy, risk-proportionate CDD are among the regulations.” The challenge for accountants is to decide on how much time they want to set aside – not only separately for the clients, but also on the case by case basis where they need to pick up the threads of their audits – and not to lose any chance of being reproved by a supervisory body for not having taken enough steps in this process.

“Also, keeping track of the client will be problematic if an individual was tracked as low risk at some point in time but later on identified as medium/normal risk.” How can the accountant explain contacting a long-standing client and asking for additional identification proof?

“Therefore the simpler option would be to treat all clients as medium/normal risk from the beginning unless they show some features, which would move the clients to the higher risk bracket, present themselves.”

Winch, highlighted that MLR is for “close to 100,000 businesses”. He added, “If that number is accurate, it seems that bookkeepers and accountants could be the biggest group within that; however, not much of the consultation seems to apply to High Street accountants.”

Upcoming Consultation

This consultation complements the other one that has recently been launched by the government regarding changes in the anti-money laundering supervision under the Treasury, where it has been proposed that the range of options to be considered is to include additional powers for the Office for Professional Body Anti-Money Laundering Supervision, as well as to remove the HMRC and the professional bodies of their supervisory responsibilities, and setting

Baroness Vere declared it might happen in the coming months that the decision on the reform package of the oversight regime should be taken.

The UK government hopes to receive replies on the proposed consultation on June 9, 2024.