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The New Money Laundering Regulations

By Andy Holton

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) were published on 22nd June 2017 and came into force on 26th June 2017. They replace the Money Laundering Regulations 2007 (S.I. 2007/2157) and the Transfer of Funds Information on the Payer) Regulations 2007 (S.I. 2007/3298) with updated provisions that implement in part the Fourth Money Laundering Directive and also the Funds Transfer Regulation of the European Parliament and of the Council.

A copy of the regulations can be downloaded here.

There are no significant changes in the final Regulations from the draft issued in March 2017.

Key points to note from the new Regulations

Business relationships (Reg. 4)

Formation of a company for a client is to be treated as a business relationship for the purpose of the Regulations, whether or not the formation of the company is the only transaction carried out for that client. This means that Client Due Diligence (CDD) must be applied.

An estate agent is to be treated as entering into a business relationship with a purchaser (as well as with a seller), at the point when the purchaser’s offer is accepted by the seller. This means that CDD must be applied to the purchaser as well as the seller.

Application not extended to letting agents (Reg. 8)

Regulation 8 on application refers to estate agents but has not been extended to include letting agents.

High value dealers (Reg. 14)

The threshold for registration as a high value dealer has fallen and now applies when making or receiving a payment of €10,000 (previously €15,000) in a single or series of inked transactions.

Exclusions from regulation (Reg. 15)

The turnover threshold where a person is considered to be engaging in financial activity on an occasional or limited basis is increased to £100,000 (previously £64,000).

Risk assessment (Reg. 18)

The factors that must be taken into account in assessing risk are specified in greater detail and include the nature and size of the business and the geographical areas where it operates. There is also a specific requirement to keep an up to date record of the assessment.

Policies and procedures (Reg. 19)

The requirements here are significantly expanded from what was required previously. This includes setting out the scope of the policies and requiring procedures to ensure they are implemented and remain up to date.

Training (Reg. 24)

Regular training on the requirements of the legislation and how to recognise and deal with money laundering must be provided. Firms are also required to keep records of the training that was provided and when.

Customer due diligence (Reg. 28)

The requirements here are generally more prescriptive than previously. For example, paragraph 9(a) of Regulation 28 specifically states relying solely on the register of persons with significant influence maintained under the Companies Act 2006 does not satisfy the CDD requirements.

Enhanced due diligence (Reg. 33)

The obligation to apply enhanced due diligence is primarily risk driven although specific occasions when it must be applied include where a client is a PEP or based in a high risk third country (as identified by the European Commission).

The specific enhanced due diligence measures applied may therefore vary based on the assessment of risk. However, factors to take into account in the risk assessment are specified in greater detail.

Politically Exposed Persons (Regulation 35)

Enhanced due diligence is still required for PEPs although the specific measures applied may vary with the risk assessment for the PEP in question.

A PEP is anyone entrusted with a prominent public function and now includes domestic PEPs.

Simplified Due Diligence (Reg. 37)

Simplified due diligence applies where there the risk assessment is low. However, as noted above, factors to consider in the risk assessment are specified in greater detail which may therefore in practice reduce the incidence of a low risk outcome.

Reliance of CDD undertaken by others (Reg. 39)

A firm may place reliance on CDD undertaken by any other firm within the regulated sector. However, the firm would remain liable for any failure to apply such measures by that other firm.

Register of beneficial ownership for trusts (Reg. 45)

Relevant trusts (basically those with tax consequences) must register and supply HMRC with the required information on beneficial ownership on or before 31 January 2018.


We are currently working on fully updating all our relevant AML systems as necessary in line with these new regulations.

2017 Money Laundering Regulations - New Course

 

June 2017 

 

Disclaimer
This article is published with the understanding that SWAT UK Limited is not engaged in rendering legal or professional services. The material contained in this article neither purports, nor is intended to be, advice on any particular matter. This article is an aid and cannot be expected to replace professional judgment. SWAT UK accepts no responsibility or liability to any person in respect of anything done or omitted to be done by any such person in reliance, whether sole or partial, upon the whole or any part of the contents of this article.