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New rules on money laundering

New rules on money laundering

Overview

The Fifth Money Laundering Directive comes into force on 10 January 2020. Firms will need to be ready.

The Fifth Money Laundering Directive is due to come into force in the UK on 10 January 2020 through amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs). 

HM Treasury has not yet published the final version of the MLRs and it is possible that these will only be made available at the last minute.  As a result, firms may only have a very short window to get ready to apply the new requirements.  Therefore firms should starting reviewing their procedures and policies now against the draft requirements.

NOTE

Although the final rules are not yet out, firms should start to review their procedures and policies now against the draft requirements to ensure that they are ready for 10 January 2020. 

Main points

The main points in the draft MLRs for firms to be aware of include:

  • Customer due diligence: New requirements in respect of customer due diligence including additional identification and verification obligations, a requirement to collect proof of registration on beneficial ownership registers (where relevant) and a requirement to refresh customer due diligence in certain cases.

  • Enhanced due diligence: A requirement for firms to apply enhanced due diligence to business relationships or transactions "involving" high risk third countries (rather than just where persons are "established" in high risk countries).

  • Reporting requirement: A requirement for firms to report any discrepancies discovered between the information they hold and the information on the register for People with Significant Control.

  • Group policies: A requirement for firms which are part of a group to have policies requiring branches and subsidiaries to provide customer account and transaction information.

  • Risk assessments: A potential requirement for financial sector entities to undertake risk assessments prior to the launch or use of new products, business practices and delivery mechanisms.

  • Express Trusts: A requirement for UK express trusts and some non-EU express trusts to register with HMRC's Trust Registration Service.

  • Extended scope: Certain tax advisors and cryptoasset exchanges and custodian wallet providers to become subject to the MLRs for the first time.

Further information

We discussed the forthcoming changes in more detail in the following briefings:

MLD 5: the MLD 4 upgrade

MLD 5: HMT consultation on UK transposition

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