Money Laundering (Amendment) Regulations 2019

On 10 January 2020 changes to the Government’s Money Laundering Regulations came into force. They update the UK’s AML regime to incorporate international standards set by the Financial Action Task Force (FATF) and to transpose the EU’s 5th Money Laundering Directive. Specific changes to the regulations that may affect your business include the following categories:

New Obliged Entities

• regulation 11(d) provides an expanded definition of what a tax adviser is, which means anyone who provides support with tax matters will now come under the definition of an accountancy service provider.
• regulation 13 (3) to (7) defines letting agency businesses.
• regulation 14 defines what an art market participant is and what a ‘work of art’ is.

Compliance under MLRs

• regulation 19 means that businesses need to carry out a money laundering risk assessment of new products, business practices, or technologies before they implement them.
• regulation 20 sets out requirements in respect of business group-wide policies on the sharing of information about customers, customer accounts, and transactions for money laundering/terrorist financing purposes.
• regulation 24 agents of money service business principals who are delivering the regulated business must receive relevant training from their principals.
• regulation 26 (7)(b) sets out requirements to ensure individuals convicted of relevant offences do not act in key roles in regulated firms.
• regulation 27 requires art market participants to apply customer due diligence measures on all transactions of 10,000 euros or more regardless of payment method.

Customer due diligence

• regulation 27 sets out requirements for relevant persons to apply customer due diligence measures where there is a legal duty under the relevant international tax compliance regulations, or a duty to review information relevant to the risk assessment or beneficial ownership of the customer.
• regulation 28 sets out requirements for measures to be taken to understand the ownership and control structure of persons, trusts and companies as a customer, and to verify the identity of senior managing officials responsible for managing corporate bodies, particularly when the beneficial owner cannot be identified.
• regulation 28 sets out circumstances in which information may be regarded as being reliable and independent of the person providing it where it has been obtained by means of an electronic identification process.

Reporting discrepancies to Companies House

• regulation 30(a) sets out a requirement to check trust and company beneficial ownership registers before establishing a business relationship, and to report any discrepancies found to Companies House.

High-Risk Factors

• regulation 33 sets out requirements to apply enhanced due diligence, explains what a ‘relevant person’ is, and what ‘being established’ means.
• regulation 33 extends the factors a responsible person must consider when assessing the risk of money laundering to include whether the customer is third country national applying for residency rights in an EEA state.
• regulation 33 extends ‘risky’ products to include oil, arms, precious metals and tobacco.

E-money thresholds for customer due diligence (CDD)

• regulation 38 reduces the threshold for which low risk electronic money products can be exempt from customer due diligence from 250 euros to 150 euros.

Registration with HMRC

regulation 56 explains that money service business and trust or company service businesses who apply to register from 10 January 2020 will not be able to carry out relevant activity until they are registered with HMRC

With the advent of the Money Laundering Regulations 2017 just around the corner, getting your policies and procedures ship shape and compliant with the new Regulations can be time consuming especially in the light of Regulation 18(4) which states ‘A relevant person must keep an up-to-date written record of all steps it has taken’ which means your procedures may be asked for by your Supervisory body.

At the heart of the Regulations has always been knowing who you deal with and as such the verification of the client and any beneficial owners are paramount. The new JMLSG guidance in 5.3.14 makes it clear on the verification of not just the customer but also any beneficial owners.

Verification methods have noticeably shifted away from ‘so called identity documents’ to electronic verification, which can offer a much more reliable range of verification data without meeting the customer or beneficial owner face to face.

The range of verification SmartSearches we offer as an agent of Smart Credit are one of the most advanced and reliable offered in the UK covering individuals and company compliance issues.

Please contact us to see how we can help you with your verification of customers on a non-contractual basis.