On 13 November 2018, HM Treasury published the draft Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018 (the Regulations), together with an explanatory memorandum.
The Fourth EU Anti-Money Laundering Directive was transposed into UK law by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs). The EU Funds Transfer Regulation (FTR) is directly applicable in the UK and specifies what information must accompany electronic transfers of funds carried out by payment service providers. The Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 (OPBASR) give the FCA a role in overseeing the anti-money laundering / counter terrorism financing (AML / CTF) supervision by 22 professional body supervisors within the accountancy and legal sectors.
The Regulations address deficiencies in each of the MLRs, FTR and the OPBASR that arise from the UK leaving the EU to ensure that this legislation continues to operate effectively.
There are no substantive policy changes within the Regulations to the wider UK AML regime – the only changes that it makes are to ensure that the UK’s AML regime continues to operate effectively once the UK ceases to be a member of the EU.
The key changes to the UKs AML/CTF regime are:
- the MLRs, FTR and OPBASR currently require certain UK persons to have regard to European Supervisory Authority (ESA) guidelines. These references are removed;
- the MLRs require certain information to be communicated to EU institutions, including the ESAs. These provisions are removed;
- the MLRs will be amended and require UK credit and financial institutions to conduct enhanced due diligence on intra-EEA correspondent banking relationships. In addition, the MLRs reference the European Commission’s high-risk third country list – this list will be onshored as part of UK law. The list will only evolve as amended by UK law;
- the Regulations empower the FCA to make technical standards to specify what additional measures are required to be taken by credit and financial institutions with branches or subsidiaries abroad; when national law outside the UK does not permit group-wide policies and procedures to be implemented that are at least as strong as those that are required by the MLRs;
- the FTR requires that a greater volume of information identifying payers/payees is provided by payment service providers (PSPs) for transfers of funds outside the EU than is the case for intra-EU transfers of funds. The Regulations will require that he same levels of information are provided by PSPs, regardless of whether other PSPs to which funds are being transferred are within or outside the EU. Transfers between the UK and Gibraltar will be treated for the purposes of the FTR as being equivalent to internal UK transfers.
The Regulations will affect PSPs, supervisory authorities and firms regulated through the UK’s AML/CTF regime. The Regulations will be laid before Parliament in due course.