Part 6: Upcoming changes to the UK’s anti-money laundering regime
In July 2021, HM Treasury launched a new AML consultation entitled ‘Amendments to the Money Laundering Terrorist Financing and Transfer of Funds Regulations 2017’. This consultation outlined ways in which the government intended to amend the UK’s money laundering regulations (MLRs) with several time-sensitive updates. The planned updates are required to ensure that the UK continues to meet international AML standards, whilst also clarifying how the UK’s anti-money laundering and counter-terrorist financing (AML/CTF) regime works.
The changes to the MLRs have been made through 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
In this series of blog posts, we take a closer look at what these changes will mean for anti-money laundering compliance.
Bank Account Portal (BAP)
The government reviewed the case for building a BAP. Given the uncertainty over the benefits, and substantial cost to the public and private sectors, the government decided against building a BAP. Therefore, the SI will remove the now redundant obligations on the private sector under Part 5A of the MLRs.
Terrorist Financing and Asset Freezing etc Act 2010
Upon leaving the EU, the Terrorist Asset-Freezing etc Act 2010 (TAFA) was replaced by the Counter-Terrorism (Sanctions) EU Exit Regulations) 2019. The reference to TAFA in the MLRs is now redundant and will be removed. This amendment will ensure historic legislation is not referenced in the MLRs. This measure is a minor, clarificatory change and was therefore not included in the SI Consultation Document.
Regulation 15 Exclusions
This measure will amend Regulation 15(3)(f) to include in its reference to relevant persons under Regulation 8(2), AMPs (8(2)(i)), cryptoasset exchange providers (8(2)(j)), and custodian wallet providers (8(2)(k)). Their exclusion appears to have been an oversight from when 5MLD was transposed not to include these activities under Regulation 15(3)(f) and creates a potential loophole, and this measure will close the loophole. This measure was not included in the SI Consultation Document as it was considered to be a minor clarificatory change.
Change in control-cryptoasset firms
Currently, it can take up to 90 days from the date of acquisition to cancel a cryptoasset firm’s registration if the FCA is not satisfied that the firm or its beneficial owner is fit and proper. This leaves a gap in which firms could bypass the MLRs’ registration gateway by acquiring already registered cryptoasset firms, potentially enabling the acquiring firm to undertake illicit activities before the FCA could take action.
This measure will close this gap by amending Regulation 57 and adding a new regulation, 60B, which will require proposed acquirers of cryptoasset firms to notify the FCA ahead of such acquisitions, allowing the FCA to sufficiently assess the acquirer and providing them with the power to object to any acquisition before it takes place and cancel registration of the firm being acquired.
This measure will come into force as soon as possible once the SI is made.
Notices of refusal to register
This change was consulted on as part of the 2019 Transposition of the Fifth Money Laundering Directive consultation and was therefore not included in the consultation for this SI. This measure will enhance the transparency of the decision-making processes and has been developed with the FCA in tandem with the amendments to Regulations 57 and 59 of the MLRs. This measure will therefore also come into force at the earliest opportunity once the SI is made.
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