On 24 June 2022, HM Treasury published two post-implementation reviews and a forward looking review of the UK’s anti-money laundering and countering the financing of terrorism (AML/CFT) regime.
The post implementation reviews fulfill HM Treasury’s statutory obligations and cover the Money Laundering Regulations 2017 (MLRs 2017) and the Office for Professional Body AML Supervision Regulations (OPBAS).
In the forward looking review HM Treasury focuses on three key themes:
- Systemic effectiveness: ensuring that as the government works to reform and improve the UK’s regime there is an agreed definition of what effectiveness looks like and some proposals on how the government can start to measure this with more precision.
- Regulatory effectiveness: ensuring that those firms and individuals on the front line of the UK’s fight against illicit finance are well-equipped, with a strong risk understanding and capability to implement effective risk-based controls within their business, as well as the scope to target that activity at areas of highest risk.
- Supervisory effectiveness: continuing reform of the supervision regime, building on the improvements made in recent years while assessing the rationale for further structural change to the regime.
Among other things, in the forward looking review HM Treasury states that:
- The objectives for the MLRs 2017 are being refined. This includes clarifying that supervisors should be both monitoring and enforcing compliance with the MLRs 2017, as part of a risk-based approach to supervision.
- The government will be setting out wider’ outcomes-focused’ metrics as part of the updated Economic Crime Plan later this year.
- The government is committed to developing a revised set of priority metrics, with the aim of providing clear feedback on the overall effectiveness of the MLRs 2017.
- There is insufficient evidence at the current time for a fundamental overhaul of the preventative measures required under the MLRs 2017, and that increasing consistency of compliance with the current requirements should be a priority in order to increase the overall effectiveness of the MLRs 2017.
- The government is proposing that the national risk assessment (NRA) acts as the central vehicle through which emerging risks are assessed to determine whether inclusion in the MLRs 2017 is a proportionate outcome.
- This is not the time to fundamentally shift the balance of mandatory requirements under the MLRs 2017 although some requirements are under consideration. For example, the government will work with supervisors and OPBAS to understand how small and newly regulated firms are currently supported to fulfill their obligations, and whether there is any additional support that could be offered.
- The government is committed to doing further work to better understand the risk profile of domestic politically exposed persons.
- There is no reason to make any changes to the definition of correspondent relationships in the MLRs 2017.
- In the context of enhanced due diligence, the government will review the words ‘complex’ and ‘unusually large’ and consider whether an alternative provision would more clearly deliver the policy intent.
- The government does not plan to make changes to the components of simplified due diligence or the description of flexibility currently given in the MLRs 2017.
- The government plans to consult on options aiming to address the difficulties in accessing pooled client accounts (PCAs), including the option of broadening the range of low-risk circumstances in which PCAs may be provided without checks being required on the clients whose funds are held in the account.
- The government is not minded to change the record-keeping requirements around reliance, which mirror those around ordinary customer due diligence.
- The government will consider amending the MLRs 2017 to ensure greater clarity on how electronic identity processes certified against the Department for Digital, Culture, Media and Sport Digital Identity and Attributes Trust Framework support MLRs 2017 requirements.