HM Treasury (HMT) has published a consultation document on the transposition of the Fourth Anti-Money Laundering Directive (4MLD) and the revised Wire Transfer Regulation (revised WTR).

Where EU Member States are given the discretion to make decisions on certain aspects of the 4MLD and revised WTR, the consultation outlines the Government’s proposals or issues to be addressed for transposing them into UK law and seeks views.

The Government seeks views on a number of areas covered in the 4MLD and the revised WTR including:

  • simplified customer due diligence (CDD) – the Government proposes to remove the existing list of products subject to a simplified CDD, currently set out in Article 13 of the Money Laundering Regulations 2007 (MLRs), and follow the non-exhaustive list of factors contained in Annex II of the 4MLD;
  • correspondent banking – the Government notes that there is no definition of correspondent banking in the MLRs and that the new definition set out in Article 3(8) 4MLD extends the definition provided by the Financial Action Task Force to include relationships between and among credit institutions and financial institutions. The Government also notes that the enhanced due diligence (EDD) measures set out in Article 19 of the 4MLD are in line with current correspondent banking requirements under the MLRs. As this is not an area where the 4MLD offers exemptions to EU Member States the Government will be transposing the requirements into UK law. The Government also mentions that in line with the 4MLD it expects firms to take a risk-based approach in their activities, such as, following the identification of a correspondent relationship, EDD measures are adapted so as to be commensurate with the risks posed by the relationship and in line with the firm’s risk appetite. The Government seeks views on the best way to achieve this, for example through guidance and application by the sector;
  • Politically Exposed Persons (PEPs) – the Government’s view is that the 4MLD permits a risk-based approach to identifying whether a customer is a PEP and the application to different degrees of the EDD measures set out in Article 20 of the 4MLD so as to be commensurate to the risk posed. In low risk cases, the Government’s view is that UK PEPs, their family members and close associates should be treated at the lowest level of enhanced due diligence. The Government also notes that it is important that there is appropriate industry guidance available to ensure that obliged entities take an effective, proportionate and risk-based approach to the PEP regime. The Government also seeks views on whether it should include senior members of international sporting federations within the UK’s definition of PEPs, along with their family members and known close associates;
  • beneficial ownership and one-off company formation – the Government proposes to redefine one-off company set ups as business relationships that have an element of duration, thus falling within the scope of CDD requirements;
  • supervision of obliged entities – the Government proposes that all supervisors be given an express power to refuse to register or to cancel an existing registration in certain circumstances; and
  • Money Service Business (MSB) and the fit and proper test – the Government suggests that the test be extended to agents of MSBs themselves.

The deadline for comments on the consultation is 10 November 2016. The Government’s final policy decisions will be implemented through legislation to come into force by June 2017.

The Government proposes to create one set of Regulations to transpose both the 4MLD and the revised WTR into UK law, which will be called the Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017.

View Transposition of the Fourth Anti-Money Laundering Directive, 16 September 2016