The Money Laundering Regulations 2017 require relevant businesses to:

• Make employees aware of the laws relating to money laundering and terrorist financing
• Regularly provide training on how to recognise and deal with transactions and other activities which may be related to money laundering or terrorist financing

What is a relevant business? 

Money laundering regulations apply to various business sectors, including financial services, accountants and estate agents, and other businesses such as law firms undertaking regulated work.

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At least £57 billion is laundered through the UK each and every year. It’s not just criminals turning their illicit money from crime clean. Terrorist financing is often overlooked when it comes to anti-money laundering efforts, but acts of terror in the UK and around the world are being bankrolled in the same way as money is laundered.

Law firms, as well as other professional services such as accountants, estate agents and financial services, are at high risk of being patsies for criminals and terrorists. Because their accounts are seen as “clean,” sending dirty money into a law firm’s client account and having it sent back out again is a sure fire way to launder dirty cash.
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The Fourth Anti-Money Laundering Directive, which came into force on 26th June 2017, brings some key changes to the anti-money laundering policies in law firms and organisations. Recent high profile money laundering scandals demonstrate the importance of having the right procedures in place to prevent money laundering. This blog gives some examples of the money laundering convictions that have damaged the reputations of firms and organisations.

Deutsche Bank learns anti-money laundering lessons the hard way

In January, Deutsche Bank, Europe’s largest investment bank, was hit with an incredible £500 million from multiple regulators. The bank ran a $10bn money laundering scheme involving the Moscow, New York and London branches shifting roubles between Cyprus, Estonia and Latvia in a manner that was “highly suggestive of financial crime.” The regulators said “the bank missed numerous opportunities to detect, investigate and stop the [money laundering] scheme due to extensive compliance failures, allowing the scheme to continue for years.”
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Jersey, Guernsey and the Isle of Man are not members of the European Union and are not obligated to adopt the EU’s Fourth Anti-Money Laundering Directive as the UK has done with the Money Laundering Regulations 2017.

However, with close to 100 licensed banks, tens of thousands of regulated professionals and hundreds of billions of pounds in deposits and funds across the Crown Dependencies, complying with Financial Action Task Force (FATF) guidelines and implementing a international AML/CFT standards is a priority for the Bailiwick’s of Jersey, Guernsey, and the Isle of Man.

Jersey and Guernsey, in their 2017 answers to the European Parliament committee investigating the Panama Papers, have committed to reviewing the Fourth EU Money Laundering Directive “after it has been approved at all EU levels”. The Crown Dependencies are likely to implement such measures as other third countries.

Current AML legislation in each Crown Dependency

Isle of Man

• Isle of Man Proceeds of Crime Act 2008
• Anti-Money Laundering and Countering The Financing of Terrorism Code 2015
• Beneficial Ownership Act 2017

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The government released a draft of the Money Laundering Regulations back in March 2017 outlining the proposed approach to transposing the Fourth Money Laundering Directive into UK law. On 26^th June, those Regulations became law, having been rushed through Parliament.

Most of the content of the final law is the same as in the draft; the key changes we have outlined previously. However, there are a few important additions included in the final version of the Regulations that were not in the draft.
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The Fourth Money Laundering Directive came into force on 26 June 2017. The new Money Laundering Regulations 2017 contain some key changes over the previous law that will take some time to implement.
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The Fourth Money Laundering Directive updates and expands anti-money laundering laws across the European Union. Unlike GDPR, which will automatically come into force, updating the AML regime requires each national parliament to transpose the regulations into local law.

In the UK, this means updating the Money Laundering Regulations 2007. The government completed their consultation in April and published a draft of the Money Laundering Regulations 2017 to be laid before parliament. The EU stated that the Fourth Directive must be in force in every country by 26 June 2017.

However, the general election called by Theresa May has thrown that timetable into disarray. The new parliament won’t meet until sometime between 14 to 21 June, leaving barely days before the deadline.

Will the UK miss the deadline?

Most likely, although perhaps not by much. The draft statutory instrument has been published and is ready to be considered by parliament. Given the long lead-in time of the Fourth Directive, the consultations and lack of particularly controversial measures, even a change of government is not likely to disrupt the process too much.

Broadly, we know what the new requirements of the Fourth Directive are, and how the UK plans to implement them. While the official change won’t take place until the 2017 Regulations is law, there is every reason to think this will happen sooner rather than later.
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