Laura WilesHM Treasury has reviewed the responses to its consultation on improvement the effectiveness of the MLRs, and has published a response setting out key areas where it intends to make changes.
The consultation covered four main themes: making CDD more proportionate and effective; strengthening system coordination on economic crime; providing clarity on scope of the MLRs; and reforming registration requirements for the Trust Registration Service.
The areas where HM Treasury intend to make changes to the MLRs are:
- Enhanced due diligence on complex transactions and on high-risk third countries:
- HM Treasury will work with supervisors and industry bodies to ensure clarity in guidance around the list of risk factors for EDD , and where there is a mandatory requirement to carry out EDD;
- It will also amend the MLRs to clarify that EDD is required on “unusually complex” transactions, rather than all complex transactions;
- In respect of high risk third countries, EDD will be mandated only where the relevant transaction or customer relationships involve a person established in a FATF Call for Action country (currently only DPRK, Myanmar and Iran), not an Increased Monitoring List country; and
- Broader requirements to assess geographic risk, including for regulated firms to consider both FATF lists when carrying out customer risk assessments;
- Due diligence on pooled client accounts;
- Due diligence triggers for certain non-financial firms:
- HM Treasury plans to align the transaction-based CDD triggers for art market participants and letting agents with the equivalent provision for high value dealers; and
- It will also asked the supervisors and industry bodies producing sector-specific AML guidance to review them in relation to the establishment of a business relation, and to consider whether extra detail would assist firms to apply the MLRs more proportionately;
- Onboarding of customers in bank insolvency scenarios:
- HM Treasury will amend the MLRs to provide for relevant carve-outs from CDD requirements to assist the customers of an insolvent bank to access and transaction from new accounts quickly;
- Information sharing between supervisors and other public bodies – in particular, the Financial Regulators Complaints Commissioner will be added to the list of relevant authorities involved in the information sharing gateway;
- Supervisor cooperation with Companies House – in particular, the Registrar and Secretary of State responsible for Companies House will be added to the list of supervisory authorities which must take steps to co-operate with other authorities in relation to AML and CTF;
- Currency thresholds currently in euros will be changed to GDP;
- Sale of “off-the-shelf” companies by Trust and Company Service Providers will be included in the scope of regulated TCSP activity;
- Registration and change in control for cryptoasset service providers:
- The requirement for cryptoasset firms to register under both the MLRs and authorised under FSMA will be removed;
- The fit and proper checks for both types of supervision will be aligned; and
- Firms authorised for the soon-to-be-regulated cryptoasset activities will no be required to additionally register as “cryptoasset exchange providers” or “custodian wallet providers” under the MLRs; and
- Registration requirements for the Trust Registration Service (TRS):
- The TRS will be amended to include all non-UK trusts holding an interest in UK land and property acquired before 6 October 2020; and
- HM Treasury will also introduce a de minimis exemption for certain trusts currently required to register on TRS.