Each month, we take a look at the latest compliance news and insights to keep you on top of what you need to know from across the industry.
In June, regulations evolved for the legal sector, sanctions continued for Russia, while fintech companies and compliance professionals celebrated getting back together at Money20/20.
Anti-money Laundering Requirements for the Legal Sector
Legal firms are facing increasing pressure to maintain their obligations under the Solicitors Regulation Authority (SRA) and declare whether they fall within the money laundering regulatory regime. With the deadline looming, compliance officers for legal practice, MLROs and MLCOs within the legal sector have until 31 July 2022 to complete the information. Failure to submit may incur regulatory action as the SRA looks to assess the AML risk posed by the firms they regulate.
No doubt many legal firms are wishing they had automated their compliance processes sooner. It could be a real challenge to scramble to gather all the necessary information from the various manual sources within the time frame.
With an automated solution all cases are held within a cloud environment which is agile enough to pull reports on any of the annual reporting requirements within minutes rather than days. Such obligations include:
- volume of Suspicious Activity Reports (SARs) reported to the National Crime Agency
- number of PEPs or UBOs that were reviewed for enhanced due diligence
- number of new matters that were opened were in the scope of AML
- number of formal internal reports of suspicion that were made
- the value of the largest deposit
The regulators are under pressure from MPs to get tough and issue greater fines for those firms that don’t adhere and deliver better AML supervision, so it’s clear the problem isn’t going away any time soon.
Announcement of Amendments to Money Laundering and Terrorist Financing Regulations
June saw the announcement, from HM Treasury, of a new Statutory Instrument (SI), covering proposed changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
Following its 2021 consultation the UK government has now published its consultation response which summarises the feedback and sets out the government’s approach to making changes to the statutory instrument.
The majority of the changes to the Money Laundering Regulations, in legislation formerly titled ‘The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022’, will come into force on 1 September 2022, subject to parliamentary approval.
Key areas affected by the new legislation include:
- Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs). It’s proposed that AISPs will no longer fall within the regulated sector, whilst PISPs will remain regulated.
- Bill Payment Service Providers (BPSPs) and Telecoms, Digital and IT Payment Service Providers (TDITPSPs). Both will remain within the regulated sector, for the moment, but HMRC will carry out further research to fully determine whether the risk is sufficient, or whether they should be deregulated.
- Art Market Participants (AMP). The regulations will be amended to explicitly exclude artists who sell their own work, from the definition of an AMP, although money laundering monitoring of the sector will continue to take place.
- Suspicious Activity Reports (SARs). This measure gives AML/TCF supervisors a clear gateway for access to view details of SARs submitted by supervised populations.
- Proliferation Financing Risk Assessment. The international standards set by the FATF definition of proliferation financing will be used in the MLRs, by supplementing Regulations 16, 17 and 18.
- Reporting of discrepancies. The discrepancy reporting requirement will be expanded, by including an additional provision to Regulation 30A(1), broadening the scope of the measure to cover an ongoing business relationship. Additionally, discrepancy reporting will be expanded to include anyone on the ROE (Register of Overseas Entities).
- Transfers of crypto assets. Changes to enable compliance with FATF Recommendation 16, regarding information sharing requirements for wire transfers to crypto assets (“the Travel Rule”), following a 12-month grace period to allow crypto asset businesses to find solutions to enable compliance with the Travel Rule.
Fuller details can be found in the Response to the Consultation, available here.
We already know that the Council of the European Union (EU) has reached a “provisional agreement” on a new landmark regulatory framework for cryptocurrencies so watch this space as we will be providing further details in our July round up as more details are released.
Sanctions Continue for Russia
Further announcements were made for Russian sanctions at the G7 summit held at the end of June, with new exports of Russian gold no longer allowed to enter the UK, Canada, US and Japan.
However, according to Reuters there was a steep decline in exports to the UK earlier this year as the London Bullion Market Association (LBMA) suspended its accreditation of Russian precious metals refiners, barring them from selling new production in London.
Britain imported $15.2 billion worth of Russian gold last year. According to UK customs data, 29 tonnes, worth $1.7 billion, were imported from Russia in February, according to UK customs data on the U.N. Comtrade database. This figure dropped substantially In March, the last month for which data was available, as Britain imported just 26 kilograms from Russia.
Oligarchs initially rushed to buy gold bullion to avoid the impact of Russian sanctions but now see this route blocked as countries continue to find ways to isolate Russia from the international financial system.
Since the invasion of Ukraine, the UK has sanctioned more than 1,000 individuals and 100 entities so regulated businesses must ensure they remain compliant and continually monitor their clients against PEPs and Sanctions as well as adverse media data.
Our Whistle-stop Tour of Amsterdam and Money20/20
The long-awaited return to an in-person event didn’t disappoint. After two years of Zoom and Teams, the fintech community was itching to get back to human connections and collaborate in person.
Money20/20 Europe, held in Amsterdam, was a roaring success earlier this month. It’s the largest global fintech event enabling payments and financial services innovation for connected commerce. Some of the world’s biggest big brands were in attendance including HSBC, Visa, Mastercard, Spotify, OnlyFans, Starling, FIS and Stripe, with lots of great sessions covering topics from Buy Now, Pay Later and financial inclusion, to DeFi, decarbonising crypto, and NFTs. Read our highlights here.