The Treasury published The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (the “MLTF Regulations“) shortly before Christmas http://www.legislation.gov.uk/uksi/2019/1511/contents/made. These regulations implement the Fifth Money Laundering Directive (5MLD) into UK law. The form of the MLTF Regulations was consulted on by the Treasury in April and will introduce a number of significant changes.Although the Treasury delayed publication of its formal response to the Consultation, this was subsequently published on 23 January.
As with anything European, the impact of Brexit needs to be considered. The implementation date for 5MLD in the UK was 10 January 2020 and the MLTF Regulations took effect on that date. Brexit will therefore have no immediate impact.
The Treasury, in line with the terms of 5MLD, has widened the scope of the anti- money laundering regime in the UK. This will mean that additional entities will need to be registered and carry out client due diligence (CDD). The proposed extension of scope goes further than that strictly required by 5MLD in the case of crypto assets. However, the main changes are as follows:-
This definition will be extended to include any person who in the course of business provides material aid, assistance or advice about tax matters. Such advisors will now be within scope;
Letting agents for property, where the monthly rent equals or exceeds €10,000, will be brought within scope. Estate agency work already falls within the scope of the current regime. However, 5MLD extends the scope to those involved in letting activities only. The Treasury had proposed a wider scope for regulation, in terms of a lower financial threshold for lettings, but did not takes this forward.The Treasury consulted on which persons should be subject to CDD. Landlords and tenants or landlords only. CDD measures will apply to both landlord and tenant;
5MLD extended the scope of regulation to include cryptoasset exchanges (crypto to fiat) and digital wallet providers. However, the Treasury has extended the regulatory perimeter to cover a wider net of crypto activities. It has done this by including exchange services relating to crypto to crypto services (not just crypto to fiat). It has also included automated teller machines which swap crypto for hard currency or vice versa. The wording is such that initial coin offerings will often come within the scope of the MLTF Regulations. The definition of cryptoasset is also defined to include exchange, security and utility tokens.These changes reflect the Treasury’s view of the risks of cryptoassets being used for money laundering.
This is another area where the MLTF Regulations will introduce changes to implement 5MLD. The changes will bring into scope persons trading, or acting as intermediaries, in the trade of works of art where the value of the transaction or a series of linked transactions, amounts to €10,000 or more.
Register of Bank Account ownership
5MLD requires the UK to establish a centralised automated mechanism which allows identification of persons who hold or control bank accounts and safe deposit accounts. This will be used by law enforcement. 5MLD specifies the type of data set that the register must maintain. The Treasury consulted on what specific information would be included in these data sets.
The information that may be accessed via this portal will include names, dates of birth, and addresses of account holders. It will include similar information for people with beneficial interests in accounts. Information about accounts (e.g., account numbers) and of any persons with access to or control over the accounts, will also be available. Records must be maintained for 5 years after an account has closed.
This part comes into force in September.
Currently there are exemptions from some CDD measures in respect of low risk e-money transactions. These are transactions that have low monetary limits. 5MLD seeks to reduce these monetary limits further and the MLTF Regulations give effect to these lower limits.
There will also be limits on the acceptance by financial institutions within the EU of anonymous non-EU prepaid cards.
Enhanced Due Diligence (EDD)
The MLTF Regulations provide for an EU list of designated high- risk countries. Dealing with such countries, in the manner outlined in regulations, triggers the requirement for enhanced due diligence. Even when the UK does leave the EU fully, there are powers in the Sanctions and Money Laundering Act 2018 to replicate these.
The MLTF Regulations detail the additional due diligence measures that need to be taken. The regulations impose more prescriptive measures, including requirements to obtain additional information on the customer and its beneficial ownership, the customer’s source of funds, as well as implementing enhanced monitoring of the ongoing relationship. Additionally, there will be a requirement for senior management to approve the establishment or continuation of a business relationship of this nature. Part of the general trend to ensuring senior management is properly engaged.
Beneficial ownership requirements
The MLTF Regulations require that whenever a regulated person enters into a new business relationship with a company, LLP or partnership, that person must collect registration data from available registers. There is an obligation to report to the register any discrepancy between what the regulated person finds on the register and otherwise obtains through its due diligence.
On January 29, 2020