New Money Laundering Regulations
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017. The new Regulations implement the Fourth EU Money Laundering Directive (“MLD4”) and entirely replace the Money Laundering Regulations 2007, and their provisions are markedly more comprehensive.
The emphasis is very much on risk management, with a wider positive requirement for regulated firms to perform risk assessment specific to their own sector. Firms are expected to implement controls and procedures proportionate to the nature and size of their business and to continue to monitor, develop and enhance such policies and controls in the light of experience over time.
A summary of generic risk factors is set out in the Regulations as transposed from MLD4, and the Joint Money Laundering Steering Group (“JMLSG”) has recently revised Part I of its Guidance to firms to reflect the new Regulations, but there are no revisions to the Asset Finance section in Part II of the Guidance.
Customer Due Diligence is again the bedrock of the assessment of risk, and the new Regulations list various non-exhaustive indicators when enhanced CDD will be required, and likewise also expand the scope to undertake simplified CDD where, for example having assessed the specific case by reference to a range of risk factors, a firm considers the money laundering risks to be low.
Any CDD record sharing will also be subject to a clearer framework, with a requirement for a written agreement before any CDD performed by a third party can be relied upon.
The reporting regime will be enhanced by legislation which will enable the National Crime Agency to require any member of the regulated sector to provide further information in relation to a Suspicious Activity Report.
The new Regulations also involve streamlining of the somewhat convoluted supervisory regime for regulated firms, some of which is explained in the Government’s recently published Cutting Red Tape Review.
In relation to sanctions there are enhanced administrative sanctions for breaches including the publication of a statement identifying offenders and the nature of a breach.
In addition there are a number of new criminal offences, including an offence of prejudicing an investigation and an offence of making false or misleading statements in purported compliance with a requirement of the Regulations.
The new Regulations can be found here.
The revised JMLSG Guidance can be found here.