The new regulations, known as the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (MLR 2017) replace the Money Laundering Regulations 2007 and the Transfer of Funds (Information on the Payer) Regulations 2007 (MLR 2007). The new act improves upon and plugs certain gaps in the previous regulations, including:
For the most part, those persons covered by MLR 2017 remain the same as under the previous regulations and includes financial and credit businesses, accountants, solicitors and estate agents.
The new regulations now also include all gambling providers, along with increased obligations for trustees relating to transparency of beneficiaries in their trusts.
MLR 2017 does not apply to those engaging in financial activity on a very occasional basis, with a turnover of under £100,000. This is an increase from £64,000 under MLR 2007.
You can find out more about who the regulations apply to here
One of the key differences is that those who the regulations apply to are obliged to adopt a more risk-based approach towards anti-money laundering, particularly in how they conduct due diligence.
Businesses regulated by MLR 2017 must assess the risk that they could be used for money laundering, including terrorist financing.
HMRC recommends that organisations:
It is important that policies controls are updated following any risk assessment and that they are in writing and approved by senior management.
The new regulations require increased customer due-diligence to ensure that people are who they say they are. The new regulations include a “black list” of high-risk jurisdictions, which if involved in a transaction make enhanced due diligence and additional risk assessment compulsory e.g. if the person isn’t present or is from a high-risk country.
Enhanced due diligence includes: extra checks to verify identify, checking financial information, involving senior management and stricter ongoing monitoring of the relationship.
You must make sure that your business has adequate internal controls and monitoring systems in place for customer due diligence. These should alert you and other relevant people in your business if criminals try to use your business for money laundering.
Controls recommended by HMRC include:
The new regulations also include enhanced restrictions on the reliance of a third party to carry out customer due diligence. Where an organisation relies on a third party the new regulations require them to obtain copies of all relevant documentation, alongside ensure that a written agreement is in place with the third party who must also be compliant with MLR 2017.
Transparency of ownership
In addition to the UK companies register, the regulations will also introduce a new trust register, requiring trustees to register and report all trusts that generate tax consequences. HMRC has not yet launched this register, but the current indications are that trustees will have until 5 October 2017 to register new taxable trusts and until 31 January 2018 to provide information on existing trusts.
It is important that all organisations who are required to comply with the MLR 2017 regulations have made or are making the necessary changes. These should include:
To discuss the new regulations and what they mean for you and your business, please contact us.