Money Laundering Regulations consultation

HM Treasury has published a new consultation on improving the effectiveness of the Money Laundering Regulations.The consultation, which runs until 9 June principally covers issues already identified by HM Treasury, but also includes issues put forward by key stakeholders.

In this blog, we take a look at the core themes and the most relevant aspects for firms.

Making CDD more proportionate and effective

The consultation seeks to establish whether the due diligence triggers within the regulations are sufficiently clear. The triggers for CDD currently include establishing a business relationship, carrying out an occasional transaction, where there is a suspicion of money laundering, and where there are changes to a client’s identity or beneficial ownership.

The consultation also considers:

• The need for additional guidance on when to carry out source of funds checks;
• Whether there is sufficient clarity around the due diligence required when persons are acting on behalf of clients;
• Digital identity verification; and
• Updating risk factors and steps to take in relation to enhanced due diligence (EDD).

Whilst the consultation does seek views on the need for additional guidance in the above areas, it is extremely clear that the risk-based approach will remain. As such any further guidance introduced into the regulations will no doubt still require the application of significant professional judgement in determining the risk of money laundering and terrorist financing, and the appropriate responses to the risk identified.

Strengthening system coordination

Linked to the introduction of the Economic Crime and Corporate Transparency Act 2023 (discussed further in our blog The Economic Crime and Corporate Transparency Act 2023 – Update), coordination and cooperation between relevant authorities is another area of discussion within the consultation, in particular in connection with Companies House data.

The consultation further considers whether redrafting of the regulations is required in order to explore more specifically how firms should have regard to the national risk assessment (NRA) in their own risk assessments.

Providing clarity on the scope of the MLRs

Whilst not overly relevant to firms of accountants, due to firms generally being in scope regardless of the value of transactions, the consultation proposes financial thresholds for registration are converted from euros to pounds.

There is also a proposal to bring the sale of off-the-shelf companies into scope of the regulations, as such services are not directly in scope at the present time.

Reforming registration requirements for the Trust Registration Service

The consultation proposes a number of changes to the requirements to register for the Trust Registration Service. Most notably it proposes a de minimise level for registration to reduce the administration burden on certain small trusts.

AML supervision

HM Treasury is currently still considering feedback following its consultation on reforming anti-money laundering and counter-terrorism financing supervision which closed in September 2023.

How can Mercia help?

Mercia will keep track of the consultation and any changes to the regulations which follow. Our anti-money laundering compliance services will be kept up to date and we’ll be on hand to answer your technical queries too.