Government seeks reform in money laundering regulations

The HM Treasury has published its response to the 2024 consultation on the Money Laundering Regulations (MLRs). The consultation aimed to enhance the effectiveness of existing regulations by gathering stakeholder insights from a wide range of sectors. Richard Atkinson, the president of the Law Society of England and Wales, expressed a nuanced view of the proposed reforms, stating "Making the Money Laundering Regulations more proportionate, risk-based and workable for all sectors is a step in the right direction by the government." However, he voiced concerns that these changes would not substantially alleviate the regulatory burdens on the legal profession, lamenting that important issues remain unaddressed.

"Some helpful clarifications have been made such as simplifying due-diligence and defining ‘unusually complex’ transactions, but ultimately this was a missed opportunity to drive meaningful reform," Atkinson noted. He highlighted ongoing issues, including the uneven timing of client due diligence and the persistent risk of criminal liability tied to third-party checks, factors that remain a point of frustration for legal professionals and their clients.

Emma Reynolds MP, Economic Secretary to the Treasury, acknowledged the importance of a robust anti-money laundering regime, asserting that "an effective anti-money laundering and counter-terrorist financing (AML/CTF) regime is essential to prevent economic crime." She underscored the intention to capture a more targeted and clear regulatory framework, in line with recommendations from the Financial Action Task Force.

The consultation, which ran from March to June 2024, received 224 responses from various stakeholders, including businesses, law enforcement agencies, and civil society. The government’s review identified several key areas for reform, including making customer due diligence more proportionate and effective, and enhancing coordination on economic crime.

Among the proposed changes are enhancements in due diligence processes for complex transactions and high-risk third countries, as well as registration requirements for Trust and Company Service Providers. The government aims to make these adjustments while minimizing further regulatory complexities for businesses.

Moving forward, the government plans to publish a draft Statutory Instrument in the coming months to facilitate technical feedback before laying it in Parliament later this year. With these steps, HM Treasury expresses its commitment to adapting the MLRs in a way that not only combats financial crime but also supports the operational needs of regulated entities.