The government has announced further amendments are planned this year to the Money Laundering Regulations 2017. A newly published ‘Sector Plan’ for UK Professional and Business Services has been released by the UK Government which announces that further amendments will be made to the MLR 2017 by the end of 2025. It is worth quoting the relevant paragraph in full.
Clearer and more proportionate Money Laundering Regulations (MLRs)
The MLRs are a vital tool in safeguarding against money laundering and terrorist financing risks in the PBS sector, protecting the UK’s status as a global business destination. However, the Government recognises the importance of ensuring the MLRs are clear and proportionate to the risks. Before the end of this year, HM Treasury (HMT) will therefore bring forward a package of changes to the MLRs aimed at improving their effectiveness. We also recognise the significant potential for new technology such as digital identity to streamline checks and processes for firms and customers. As part of the Government’s commitment to reducing the administrative costs of regulation for businesses by 25% by the end of this Parliament, HMT will take steps to encourage the use of digital identity for MLRs identity verification checks and has consulted on the need for clarifying guidance for regulated sectors.
The key points about the proposed changes seem to be that the MLR need to be
- clear
- proportionate to the risks
- more effective.
There are opportunities for
- new technology such as digital identity
- streamlining checks and processes for firms and customers
- reducing the administrative costs of regulation.
The UK government will
- bring forward a package of changes to the MLRs before the end of 2025
- take steps to encourage the use of digital identity for MLRs identity verification checks
- consult on the need for clarifying guidance for regulated sectors.
What should we expect?
My own guesses are that we may see
- changes to Reg 21 (Internal controls) and perhaps more specific words to replace “Where appropriate with regard to the size and nature of its business” in that regulation, and possibly also a change to the wording in that regulation requiring firms to “establish an independent audit function”
- changes to Reg 28 (Customer due diligence measures) to clarify the CDD measures required in relation to directors of client companies and beneficial owners of clients, encourage the use of identity verification technology, and perhaps recognise the work now being done by Companies House to verify the identity of directors and PSCs of UK companies
- changes to Reg 33 (Enhanced Due Diligence) and Reg 37 (Simplified Due Diligence) to provide clearer criteria for the application of EDD and SDD and more specificity on what due diligence is required
- changes to Reg 39 (Reliance) to make it easier for an individual who has already had their identity effectively verified to re-use that verification with other providers of professional and business services
- in due course, amendments to the CCAB AML Guidance for the Accountancy Sector (which was last updated in June 2023) to reflect these further amendments to the MLR 2017, encourage the use of identity verification technology and possibly to permit greater use of Simplified Due Diligence where clients present a low risk of money laundering.
But these are very much my guesses – we shall have to wait and see what transpires!
[UPDATE: These guesses of mine have proved to be almost entirely incorrect. A published draft of amendments to the MLR 2017 does not address the issues which I have listed here.]
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