HM Treasury had introduced a consultation in July of last year, entitled “Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 Statutory Instrument 2022.”
This consultation outlined how the UK Government intended “to amend the UK’s Money Laundering Regulations (the MLRs) in order to make several time-sensitive updates.”
These updates are required “to ensure that the UK continues to meet international standards, whilst also strengthening and ensuring clarity on how the UK’s AML/CTF regime operates.”
This follows feedback from industry “on the implementation of the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.”
The consultation “closed on 14 October 2021, with HM Treasury receiving 94
responses from a wide range of respondents.”
These included AML/CTF supervisors, industry, civil society, academia, and several government departments.
Through the consultation, the Treasury “sought views and evidence on the changes it proposed to make to the MLRs.”
Alongside the consultation for this SI, the Treasury also published “a Call for Evidence to inform a broader review of the UK’s AML/CTF regulatory and supervisory regimes (‘the MLRs review’).”
The MLRs review will “assess the overall effectiveness of the regimes, their extent (i.e. the sectors in scope as relevant entities), and the application of particular elements of the regulations to ensure they are operating as intended.” It will also consider “the overarching structure of the supervisory regime, and the work of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) under their two objectives: to improve the effectiveness and consistency of Professional Body Supervisor (PBSs) supervision and to increase and facilitate information and intelligence sharing between the PBSs, other supervisors, law enforcement and other agencies.”
The government’s aim has been “to keep the MLRs SI focused on a set of specific measures, which will allow the broader MLRs review to focus on the overall direction of the UK’s AML/CTF regulatory and supervisory regime for the coming years.”
The changes to the MLRs set out have been made via draft secondary legislation entitled ‘The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022’.
Most of the measures in this SI will “come into force on 1 September 2022, subject to
Parliamentary approval.”
The consultation proposed “excluding Account Information Service Providers (AISPs) from the regulated sector, given that the likely risk of money laundering and terrorist financing (ML/TF) had been assessed as low.”
The consultation also “sought views on removing Payment Initiation Service Providers (PISPs) from the regulated sector but noted the potential higher risk of these payment service providers, relative to AISPs.”
The government “received 29 responses regarding this measure from stakeholders across sectors.”
Overall, 65% of responses were “supportive of removing AISPs from scope of the MLRs, given that these businesses do not come into direct contact with customers’ funds.”
Supportive responses noted that AISPs are “unlikely to influence any kind of activity that could give rise to ML and there is currently no evidence of criminals using AISPs in any ML methodology.”
Several businesses that are registered as AISPs also “raised concerns that by being within scope of the MLRs, they are negatively impacted by disproportionate and duplicative AML obligations and compliance costs.”
This is because they are “required to comply with the MLRs by “conducting Customer Due Diligence (CDD) checks on customers, in addition to the CDD checks that are already carried out by the banks where the accounts of the customers are held.”
The consultation proposed “excluding Bill Payment Service Providers (BPSPs) and Telecoms, Digital and IT Payment Service Providers (TDITPSPs) from the regulated sector, given that the likely risk of ML/TF had been assessed as low by HM Revenue and Customs (HMRC) in relation to the specific (small) payment service providers (PSPs) supervised by them.”
The government “received 11 responses regarding this measure, from
stakeholders across sectors.” Overall, 55% of responses suggested that there was “a slightly higher risk of BPSPs and TDITPSPs being used as a tool for economic crime compared to AISPs (given that, like PISPs, they are involved in payment chains as intermediaries) and therefore should not be removed from the regulated sector.”
The consultation “sought views on options to improve consistency of approach to accessing Suspicious Activity Reports (SARs) by supervisors.”
The government “received 50 responses regarding this measure, from stakeholders across sectors.”
Overall, 66% of responses supported the proposal and “requested greater clarity in the MLRs.”
Respondents in support of the proposal to introduce an explicit legal power stated that access to SARs “would allow supervisors to identify risks to their supervised populations, to assess those populations’ understanding of risk and to determine the quality and consistency of reporting.” Of the rest, the main objections were “regarding the maintenance of confidentiality when SARs content is disclosed to supervisors and the risk of ‘tipping off’.”
For more details on this update, check here.