Money Laundering Regulation Changes Post Brexit

There have been so many amendments made to UK legislation post Brexit. As a result, there has been moutning confusion over which version is the current one. If you are unsure about the Money Laundering Regulation changes post Brexit, this article is for you!

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR17) have been revised to better suit the UK’s anti money laundering framework.

Amended Versions To Date

In 2019, a number of amendments were decided upon for the MLR17 to implement the 4MLD/5MLD changes to the EU directive. Consequently, the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force on 10 January 2020. These introduced a new document to be read alongside the existing Regulations.

To prepare for the Brexit transition period, the UK government implemented the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 in October 2020. This is the statutory instrument that updated the existing money laundering legislation.

(EU Exit) Regulations 2020

Example Amendments

An example of the amendments that span all 3 legislative documents: –

• MLR17 – Pt 3. Chpt 1. (28) ends at clause 18(b)
• MLR19 – Clause 19 inserted: (19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where: –
  (a) it is obtained by means of an electronic identification process; and
  (b) that process is secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity
• MLR20 – 19(b) is further amended: the words “an appropriate level of assurance” is changed to “assurance that the person claiming a particular identity is in fact the person with that identity, to a degree that is necessary for effectively managing and mitigating any risks of money laundering and terrorist financing”

Implementing Further Changes

Some of the changes to anti money laundering legislation may be minor. However, following an outdated version can pose serious risks for a business. You may think you have adequate AML controls and processes in place, only to find out that you are in fact missing key measures.

Customer due diligence is an essential part of preventing and monitoring money laundering. It is imperative that identities are accurately verified and validated.

Upcoming Changes

The 2020 (EU EXIT) instrument implemented further changes, some of which came into force on 6th October 2020. These included (but are not limited to):-

• 28.(19b) Customer Due Diligence – an appropriate level of assurance’ has been amended to ‘assurance that the person claiming a particular identity is in fact the person with that identity, to a degree that is necessary for effectively managing and mitigating any risks of money laundering and terrorist financing’.
• 33.(4a) Enhanced Due Diligence – regarding the provision of a life insurance policy, the relevant person must
  consider the nature and identity of the beneficiary of the policy when assessing whether there is a high risk of money laundering or terrorist financing, and the extent of the measures which should be taken to manage and mitigate that risk.
• 33.(4b) Where the beneficiary of a life insurance policy provided by a relevant person is a legal person or a legal arrangement, and presents a high risk of money laundering or terrorist financing, the relevant person must take reasonable measures to identify and verify the identity of the beneficial owner of that beneficiary before any payment is made under the policy.

Changes came into force in April 2021 relating to trust information. This must now be provided to the Commissioner for inclusion on the register of beneficial ownership. Also, any additional trusts must be included on the register as well.

Changes came into force in March 2022 extending Regulation 30A (requirement to report discrepancies in registers). This Regulation now extends to express trusts as well as companies.