Updates made to Anti-Money Laundering legislation
Legislation for the introduction of The Money Laundering and Terrorist Financing (Amendment) (No.2) Regulations 2022 (the regulations) has now been passed by Parliament, with its provisions generally coming into force from 1 September 2022.
These regulations update the existing UK anti-money laundering (AML) legislation by making some time sensitive updates to The Money Laundering Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs).
The changes are being made to ensure that the UK continues to meet international standards on AML and counter-terrorist financing while also strengthening and clarifying how the UK’s AML regime operates, following feedback from industry and supervisors.
The main changes, most applicable to firms, are outlined below.
Trust or company service provider services and business relationships
Regulation 4 widens the meaning of a trust or company service provider (TCSP) by amending regulation 12 of the MLRs to include the formation of all forms of business arrangement, not just companies and legal persons. By extending this to the formation of a ‘firm’, which is defined in regulation 3 of the MLRs, it will now specifically include Limited Partnerships which are registered in England and Wales or Northern Ireland (Scottish Limited Partnerships are already included as they are ‘legal persons’ ). The amendment regulation will cover all business arrangements and services provided that are required to be registered with Companies House.
TCSPs will now also be required to conduct customer due diligence (CDD) when they are providing services outlined in regulation 12(2)(a), (b) and (d).
Effective 1 April 2023, Regulation 9 amends regulation 30A(1) of the MLRs to extend the scope of the discrepancy reporting regime so that it is an ongoing requirement and limiting the requirement to report only ‘material discrepancies’. Regulation 30A of the MLRs requires relevant persons to report to the Registrar of Companies any discrepancies between the information they hold about the beneficial owners of companies, as a result of CDD measures, and the information recorded by Companies House on the public companies register. The requirement applies at the onboarding stage, “before establishing a business relationship” therefore the amendment aims to enhance the accuracy and integrity of the register by making the obligation ongoing.
Suspicious activity reports
Regulation 13 makes it clear that supervisory authorities can directly require members to show them Suspicious Activity Reports (‘SARs’) “to help them in fulfilling their supervisory functions, and driving greater consistency of approach to utilising SARs across supervisors”.
The amendments introduce an explicit legal right for supervisory authorities to access, view and consider the quality of the content is SARs submitted by supervised populations. This access will help supervisors deliver more effective training and clear feedback on the quality of SARs. At present, there is no standardised approach to accessing SARs due to the ambiguity of the MLRs.
Regulation 6 introduces a new requirement for all supervised firms to perform a proliferation financing (PF) risk assessment (similar to the AML firm-wide risk assessment). A definition of PF will be included in the MLRs to clarify the type of activity that would be considered PF.