24th February 2020
AML in the UK
Anti Money Laundering Regulations In The UK
Similarly, while the UK left the EU on January 31, 2020, it is committed to transposing the AML/CFT standards set out in EU’s 5th and 6th anti-money laundering directives (AMLD).
At the risk of noncompliance penalties and fines, firms in the UK should understand UK anti-money laundering laws, be familiar with the relevant financial authorities and implement a suitable compliance policy.
UK Anti Money Laundering Authorities
Her Majesty’s Revenue and Customs shares the responsibility to investigate money laundering offenses with the FCA. HMRC issues guidance on anti-money laundering in the UK, including compliance requirements for customer due diligence and transaction monitoring and the need to issue an anti-money laundering policy statement.
In addition to the FCA and HMRC, the power to enforce money laundering regulations in the UK is shared by the National Crime Agency (NCA) and the Serious Fraud Office (SFO), both of which have power of arrest and can seek warrants and court orders. UK AML/CFT authorities also have the power to freeze and confiscate assets that they suspect are involved in money laundering, terrorism financing or other criminal activities.
AML/CFT Regulations in the UK
Proceeds of Crime Act:
The Terrorism Act:
Money Laundering Regulations 2017
Money Laundering Regulations 2019
The Money Laundering and Terrorist Financing Regulations 2019 implemented the EU Fifth Money Laundering Directive in the UK, and came into effect on 10 January 2020.
This legislation extends the scope of regulated industries and changes the way customer due diligence and enhanced due diligence is conducted.
UK AML Sanctions Regime
Under the Brexit Withdrawal Agreement, EU sanctions will apply in the UK until December 31, 2020. To deal with the transition from the EU’s sanctions regime to its new regime, the UK passed the Sanctions and Anti-Money Laundering Act (SAMLA) in 2018. The act gives the UK government powers to lift and impose sanctions in line with its ongoing international obligations and to devise new targeted sanctions as part of its own regime.
The powers conferred by SAMLA set a lower requirement for the imposition of sanctions and allow the UK to freeze the assets of entities and individuals. The broader scope of the sanctions powers available under SAMLA has led to speculation that the UK might implement a more extensive sanctions regime. In particular, the UK may target Russia with Magnitsky-style sanctions designed to punish human rights violations and as a response to the Salisbury poisoning incident in 2018.
Consequences of Noncompliance with UK AML/CFT Regulations
How to Comply with UK AML/CFT Regulations
In order to comply with the AML/CFT regulations set out in POCA, the Terrorism Act and MLR 2017, banks and financial institutions must take a risk-based approach to the threats they face. In practice, firms should perform AML risk assessments of their customers and the business sectors in which they operate and use that information to implement a proportionate response.
An effective UK AML policy should involve the following measures:
AML Program: Firms must put in place an AML/CFT compliance program that includes customer due diligence and transaction monitoring measures in line with their regulatory obligations. Their AML program should also screen for adverse media stories, politically exposed person (PEP) status and sanctions lists.
Reporting Obligations: Firms must submit suspicious activity reports (SAR) to the National Crime Agency when potential money laundering activity is detected.
Money Laundering Reporting Officer: An individual must be appointed as Money Laundering Reporting Officer to oversee their firm’s AML compliance program. The MLRO should have sufficient authority and knowledge of money laundering risks to carry out their duties effectively.
AML/CFT Training: Firms should ensure their AML/CFT employees have the knowledge and resources they need by implementing an ongoing training schedule and anticipating upcoming regulatory changes.
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