Amendment to the UK’s Money Laundering Regulations
The UK government has commenced the consultation process for further amendments to MLR 2017. Compliance professionals and regulated firms need to prepare for the potential resulting changes.
The Consultation has already commenced on proposed areas for reform and is open until 14 October 2021. Amended regulations are proposed to be laid in Spring 2022.
There will be no major change to the substance of MLR 2017; however, the launch of a consultation process suggests more than minor tweaks. Some proposals, such as the expansion of the to report information to Companies House, will affect all regulated sectors. Others stand to substantially increase the compliance requirements faced by some covered industries.
The Consultation Paper’s considered amendments include:
- Ongoing requirement to report discrepancies to Companies House. Currently the duty to report material discrepancies in ultimate beneficial ownership information to Companies House exists only at the initial on-boarding phase of a relationship. Since the duty was introduced, Companies House has received more than 35,000 such reports. Views are sought on making the requirement continuous throughout the business relationship. If implemented, this change would affect all regulated companies that perform Know Your Business verification.
- Trust and Company Services providers to conduct Client Due Diligence when providing services in all types of business arrangements.
- Crypto-asset transfer information. A discussion as to whether crypto-asset firms should be required to implement systems for gathering information on the originator and beneficiary in each transaction, including name, address, account number and personal document number, Information requirements will differ if the amount is over the equivalent of £1,000. Comprehensive information would be required to be provided immediately to the FCA, HMRC, NCA or police on request.
- Changes to Art Market Participants. Since 2020 there has been much confusion around the broad definition f “art market participants” with the regulation, and whether this includes artists who may conduct business by selling their own works. Views are currently being sought on excluding artists from this definition.
Deliver change and achieve clarity
Regulated businesses are required to manage ever more complex legislation, so the UK government’s consultation for potential further amendments to the MLR 2017, should not be a surprise to any compliance professional.
With change looming there needs to be an increased focus on shifting towards digital transformation for compliance management processes to help ease the burden. With multitudes of data and processes to handle, budget constraints, conservatism when implementing compliance processes and a need to prove ROI for any investment, regulated businesses have been slow to adopt RegTech solutions. Slowly but surely businesses are now realising the clear benefits that such solutions can bring.
Automating manual “jobs to be done“
Regulatory compliance is easier with automation, data insight, and intelligence. Your business can not only deliver its AML/KYC compliance with a single software solution, it can also start to anticipate trends. The burden of undertaking manual tasks using multiple sources of data can easily become a thing of the past.
Automation of manual processes and workflows enables more consistent outputs, which in turn delivers better audit results, a quicker time-to-revenue performance, better efficiency and stronger controls. By rapidly handling any volume of activity, as well as quickly identifying the more complex cases, resources can be allocated most effectively. It can be as effective as adding an additional team member without the associated headcount implications, therefore proving a rapid ROI.
As an agile solution the rules embedded within automation software can be initially tailored to reflect your risk policies and then adjusted whenever required, for example, to replicate periodic reviews.
Digital compliance platforms can be consumed in a variety of ways: an API-only service integrated to existing CRM or workflow software, or as a web-based desktop application configured specifically for the needs of your business and users.
Digital compliance platforms can be consumed in a variety of ways – API only service integrated to an existing CRM or workflow software, or as a web-based desk application configured specifically for the needs of your business.
The move towards Intelligent compliance
With intuitive user interfaces and powerful functionality that solves the most critical AML/KYC problems, including UBO ID&V, minimisation of ambiguous results (what we call “Amber Management”) and ongoing results monitoring, customisable solutions provided by companies such as NorthRow, enable compliance teams to achieve intelligent AML/KYC operations optimised for quality and cost.
With intuitive user interfaces and powerful functionality to deliver additional solutions such as UBO, amber management and ongoing monitoring, customisable solutions provided by companies such as NorthRow, enable businesses to achieve the holistic approach to compliance talked about by so many.
Take control of your compliance
The proposed areas of the amendment are focused but the consultation reinforces that AML regulation in the United Kingdom is ever-evolving. Regulated firms need to anticipate the changes. Post-Brexit the United Kingdom is committed to robust systems to combat money laundering and financial crime but is also better able to chart its own course. Announcing the consultation, the government noted that it is “is keen to ensure that the UK’s anti-money laundering and counter-terrorist financing regime effectively deter money laundering and terrorist financing activity, whilst being proportionate and managing burdens on businesses.
For UK regulated businesses to manage upcoming changes digital transformation will be key.