On 2 September 2025, HM Treasury (HMT) published a draft of the Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (the draft SI) alongside a note detailing the policy intention of the draft SI.

The draft SI makes certain technical amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and related legislation.

Proposed changes

Among other things the draft SI:

  • Aligns transaction-based customer due diligence (CDD) requirements for letting agents and art market participants with those for high value dealers.
  • Inserts new provisions that allow credit institutions, in specific circumstances following a bank insolvency, to verify the identity of customers from insolvent banks after account opening, provided ID verification is completed as soon as practicable. The use of this exception is subject to certain safeguards including that onboarding firms must notify the Financial Conduct Authority (FCA) so that it can supervise accordingly.
  • Updates when enhanced due diligence (EDD) is required in relation to a person or transaction linked to a specific country. At present firms are required to apply EDD to transactions or customers involving high risk third countries which in turn is defined as any country on the Financial Action Task Force’s (FATF) ‘increased monitoring’ and ‘call for action’ lists. The draft SI narrows this to focus specifically on ‘FATF call for action countries’ i.e. only countries on the ‘call for action’ list.
  • Clarifies that EDD is required only for transactions that are ‘unusually complex or unusually large’ relative to what is typical for the sector or the nature of the transaction. HMT states that this change does not introduce a new obligation but rather refines the existing requirement to ensure that firms can focus their compliance efforts on transactions that present genuinely higher risks, rather than expending resources on routine transactions that do not warrant additional scrutiny.
  • Makes certain changes to the requirements concerning pooled client accounts (PCAs) including decoupling PCAs from the simplified due diligence framework, removing the requirement for banks to treat PCAs as ‘low risk’ or only offer them to anti-money laundering regulated customers.
  • Converts all monetary thresholds for CDD, reporting and transaction triggers from euros to sterling with some thresholds adjusted to ensure that the UK continues to meet international standards set by the FATF.
  • Brings the activity of selling ‘off-the-shelf firms’ within the scope of regulated activities for Trust and Company Service Providers (TCSPs) so that TCSPs selling off-the-shelf firms must comply with the MLRs’ obligations, including CDD and ongoing monitoring.
  • Amends the registration and change in control thresholds for cryptoasset firms to align with the thresholds in the Financial Services and Markets Act 2000 (FSMA). The fit and proper test is amended to require the FCA to assess whether the applicant’s controller (within the meaning of section 422 of FSMA) is a fit and proper person. This will replace the requirement for the FCA to assess the applicant’s beneficial owner. This will commence when the forthcoming FSMA cryptoasset authorisation regime comes into force. The FCA would, however, continue to apply the fit and proper test to a beneficial owner where the cryptoasset business is registered under the MLRs before the new regime and the FCA is considering cancelling the registration under the MLRs. In addition, for cryptoasset businesses registered with the FCA under the MLRs before FSMA comes into force, the draft SI will extend the category of persons required to give notice to the FCA for change of control. Beneficial owners will continue to be required to give notice, in addition to those who hold 10% or more of the shares or of the voting power or can exercise significant influence over the management of the cryptoasset business. For cryptoasset businesses registered with the FCA under the MLRs after the FSMA cryptoasset authorisation regime comes into force, the category of persons required to give notice to the FCA for change of control will align with the FSMA controller definition to ensure alignment between the two regimes.

Next steps

HMT invites feedback on the draft SI by 30 September 2025.

Subject to feedback and Parliamentary scheduling, the final instrument is expected to be laid in early 2026.