EU-U.K. Anti-Money Laundering (AML)

The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 require the UK regulated sector to apply enhanced customer due diligence to high-risk countries.

In response to recent statements from the Financial Action Task Force (FATF), HM Treasury advises firms to consider the following:

Consider as high risk and apply counter measures and enhanced due diligence measures in accordance with the risks Consider as high risk and apply enhanced due diligence measures in accordance with the risks Take appropriate actions to minimise the associated risks, which may include enhanced due diligence measures in high risk situations
DRPK* Iran* Ethiopia, Iraq*, Serbia, Sri Lanka, Syria*, Trinidad and Tobago, Tunisia*, Vanuatu, and Yemen*

*These jurisdictions are subject to sanctions measures at the time of publication of this notice which require firms to take additional measures. For details, please click here.

As reported in Crowell & Moring’s previous post, the U.K. government announced a Sanctions and Anti-Money Laundering (AML) Bill to provide the U.K. with the necessary framework and powers to implement economic sanctions and AML regulations once it formally exits the European Union.

The Sanctions and AML Bill was introduced in the House of Lords in October 2017. Several matters were discussed and amended during the Report stage in the House of Lords:

Sanctions:
The government restricted the regulation-making powers of the executive branch to cases in which there is good and reasonable cause for action and where the Parliament has issued a report.
Designations require procedural fairness and proportionality. In addition, the power to designate by description is now limited to cases in which it is not practicable for the Minister to identify by name all the persons falling within the description, and the description is sufficiently precise that a reasonable person would know whether any person falls within it.
The licensing regime was also discussed and the U.K. government stated that an initial framework for exceptions and licenses will be published and the interested parties will continue to be consulted before the Sanctions and AML Bill enters into force.

 

AML:
The government did not establish a broad power to create new criminal offenses in the AML context.
The new Bill will not implement a beneficial owner registry in overseas territories or a register of beneficial ownership of U.K. property registered outside the U.K. However, Clause 44 of the report requires the Secretary of State to publish and lay before Parliament three reports on the progress that has been made to put in place a register of beneficial owners of overseas entities.

The review of the Sanctions and AML Bill in the House of Lords was completed on January 24. The Bill was then introduced in the House of Commons for first reading on January 25. The version of the Bill introduced in the House of Commons can be found here, along with Explanatory Notes.

No amendments were made during this first reading, and the Bill’s second reading is scheduled for February 20. Three more steps are still necessary within the House of Commons (Committee Stage, Report Stage, and Third Reading) before the Bill is ready to receive royal assent and be enacted into law. There is no set time period for the discussion of amendments and royal assent.

 

Her Majesty’s Treasury (HM Treasury) will soon publish its final policy decisions in advance of the June 26, 2017 implementation of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (2017 MLRs).

The 2017 MLRs are intended to transpose the EU’s fourth directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (4MLD). The Fund Transfer Regulation (FTR) which accompanied will also be effective on June 26.

Comments received from HM Treasury’s initial request for public consultation on transposing the 4MLD in UK Regulation have already been incorporated into the regulations. Treasury officials provided a summary of the consultation as well as a summary of the interventions and opinions for stakeholders.

Coming Soon: New U.K. Office for AML Supervision of Professional Bodies

In parallel, the U.K. announced it would create a new Office for Professional Body Anti-Money Laundering Supervision (OPBAS).

Currently, there are more than 22 professional bodies that supervise accounting and legal service providers. OPBAS will coordinate and align the risk-based approaches taken by each of the 22 bodies.

In particular, OPBAS aims to publish standard AML guidance for each business sector, reducing the number of guidance documents and easing the regulatory burden on firms.

For more information, contact: Carlton Greene, Cari Stinebower, Charles De Jager; Gordon McAllister, Edward Norman, Mariana Pendas