UK Government publishes consultation on changes to Money Laundering Regulations 2007

The Government is publishing today its response to its review of the Money Laundering Regulations and proposals for improvement.

The proposals follow a Government review of the regulations, with engagement from more than 250 stakeholders, which found that the regulations and their implementation are broadly effective and proportionate, but that improvements could be made.

The Government’s proposals are intended to give businesses greater confidence to focus compliance on their highest risk areas and to discourage the tick-box approach taken by some businesses. They support the plan to reduce the burden of regulation on British businesses, as set out in the Plan for Growth. The Government welcomes views on the following proposals:

• The removal of over two dozen criminal penalties for businesses which fail to have the appropriate systems and controls in place to combat money laundering. This would allow businesses to implement a fully risk-based approach, where businesses make their own assessment of the risks they face and implement appropriate systems and controls. Civil penalties will remain and the Government will be consulting on whether regulators should have the power to impose additional penalties.
• A general exclusion for very small businesses (for example those with below £13,000 VAT-exclusive turnover per annum), or a reduction in the requirements placed on such businesses.

The Money Laundering Regulations 2007 require regulated businesses to have appropriate systems and controls in place to identify and verify the identity of their customers and carry out ongoing monitoring as appropriate.

This consultation will not affect the criminal penalties for money laundering under the Proceeds of Crime Act 2002 or the obligations of firms to report suspicious activity to SOCA.

A full list of consultation questions is available in the review. The consultation closes on 30 August 2011.

The Commercial Secretary, Lord Sassoon, said:

“It is essential that the UK’s money laundering regulations make the UK a hostile environment for money laundering and terrorist finance. But improvements can be made and we must consider the impact of these regulations on British business.

We believe that we can make the regulations more effective and proportionate by removing a range of criminal penalties on all businesses and by lifting the burdens on the smallest businesses. This will modestly reduce the burden on business, without damaging the fight against money laundering.”

Notes for Editors

1. The consultation document and the response to consultation can be found on this website: Government response to its review of the Money Laundering Regulations

2. The Money Laundering Regulations 2007, require regulated businesses to have appropriate systems and controls in place to identify and verify the identity of their customers and carry out ongoing monitoring as appropriate, based on their own assessment of the risk from money laundering and terrorist finance.

The Regulations currently contain criminal penalties that mean, in theory, responsible individuals within firms could face prosecution if they fail to have adequate systems in place.

While these criminal penalties have rarely, if ever, been used, there is evidence that their existence may deter firms from taking a risk-based approach, for fear of getting it wrong and facing prosecution.

This consultation will not affect the criminal penalties for money laundering under the Proceeds of Crime Act 2002 or the obligations of firms to report suspicious activity to SOCA.

3. The Government’s approach to money laundering regulation is designed to make the UK financial system a hostile environment for money laundering and terrorist finance, while minimising the regulatory burden imposed on UK businesses.

The objective of the review was to assess the extent to which the implementation of the Money Laundering Regulations 2007 reflects the principles of effectiveness, proportionality and engagement. The Government’s proposals aim to strengthen the risk-based approach, which is designed to give businesses the confidence to adopt policies and procedures that reflect their own assessment of risk.

4. An impact assessment of the changes proposed is also being published. Businesses, supervisors, law enforcement and others are asked to review and provide information on the costs and benefits of these changes, to inform robust analysis and to help determine whether the proposed changes will make the regulations more effective and proportionate.

5. The general de minimis limit for those businesses with less than €15,000 VAT-exclusive turnover per annum (The press notice refers to the approximate equivalent amount in Sterling), is suggested in the consultation in order to prompt discussion of this and other ideas about whether and how to define those operating at such a low level that they could be judged not to be in business for the purposes of the Money Laundering Regulations.

It is based on existing limits in the Regulations for specific activity and comes from the EU 3rd Money Laundering Directive.

6. The consultation closes on 30 August 2011.Responses should be sent to mlr.review@hmtreasury.gsi.gov.uk or to Review of the Money Laundering Regulations, 3/15, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ.

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Source: HM TREASURY