A Guide to Anti-Money Laundering for Crypto Firms
The UK government has issued a review of the UK’s anti-money laundering and combatting the financing of terrorism (AML/CFT) regulatory and supervisory regime as part of a broader effort by the government to crack down on economic crime. In the report, the government argues that “more needs to be done” to improve the effectiveness of the UK’s AML regime.
The report was issued alongside reviews of the 2017 money laundering regulations (MLRs) and the 2017 Office for Professional Body Anti-Money Laundering Supervision (OPBAS) regulations. The government is required to complete these reviews every five years.
In light of the UK’s departure from the EU, the government notes that it has “greater autonomy” in setting AML regulations that fully suit “the UK’s situation.” The review highlights the areas where the government believes improvements could be made to the country’s AML/CFT regime “without weakening overall controls,” as well as areas where further regulatory work is currently limited, such as gatekeeping and suspicious activity reporting (SARs).
Priorities in 2022
The review notes that money laundering and terrorist financing are still considered “significant threats” to the UK, with the stability of the economy and the welfare of UK citizens and those overseas increasingly at risk. As threats continue to evolve, the review highlights the UK’s need to update its AML/CFT regime to meet the changing nature of economic crime more effectively.
To this end, the government’s priorities for 2022 include an updated Economic Crime Plan and a revised set of priority metrics to provide more transparent feedback on the overall effectiveness of the MLRs. The review notes that these metrics will be informed by the FATF methodology, and may require collecting additional data through the HM Treasury’s annual supervision questionnaire.
Refined objectives for MLRs
Stemming from the government’s desire to “protect the economy and ensure the UK remains a safe and prosperous place to do business,” the review looks at improving the effectiveness of MLRs. Currently, the MLRs set out additional obligations for private sector firms working in areas with a high risk of money laundering. In the review, the government outlines some amendments to the regulations’ objectives, including:
- Ensuring the regulated sector “provides valuable intelligence” to highlight that “effective” prevention involves more than just technical compliance
- Ensuring supervisors both monitor and enforce compliance with the regulations
- Clarifying that “gathering accurate information on Beneficial Ownership” is not a primary objective of the MLRs but rather a means to identify, prevent, and report suspicious activity
Following the systemic and regulatory effectiveness discussion, the review focuses on the UK’s AML supervision regime, noting that its 2018 FATF mutual evaluation report rated this as only “moderately” effective. . To improve the “major deficiencies” identified by the FATF, the government highlights a shortlist of options for reform.
“OPBAS+” is suggested, which would involve updating the body’s formal remit and increasing its powers to allow for the imposition of financial penalties. However, the government notes that while this would avoid structural reform, the transition period could result in weaker supervision.
To provide greater consistency in supervision, the government also suggests the consolidation of professional body AML supervisors (PBSs) and the introduction of a new single professional services supervisor (SPSS). The SPSS would possess similar statutory AML powers to those provided to the Financial Conduct Authority (FCA) and HM Revenue and Customs (HMRC) and could become the default supervisor for the accountancy and trust or company service provider (TCSP) sectors.
The review also explores the potential for greater supervisory effectiveness by introducing a single AML supervisor (SAS). Operating as a dedicated AML authority, a SAS would ensure a consistent approach to supervision and enforcement across the regulated sector. However, this organization would have difficulties in supervising areas of AML supervision currently embedded within broader regulatory functions, such as the FCA’s supervision of financial institutions and the Gambling Commission’s supervision of casinos.
Compliance staff should ensure they are familiar with the report’s section-by-, as they highlight the areas likely to appear in the upcoming Economic Crime Plan. Firms should monitor for this and consider the likelihood that any amended elements may trace back to some of the open issues identified by the government in this review.
Originally published July 1, 2022, updated July 1, 2022
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