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The UK intends to bring its anti-money laundering (AML) regime into line with the latest recommendations from the Financial Action Task Force (FATF). This may not represent a big overhaul, but experts believe that financial institutions will probably feel the effects of a new Companies House reporting duty and cryptocurrency reporting requirements.
HM Treasury is consulting interested parties about its proposals to amend the country’s Money Laundering Regulations 2017 (MLRs) at the end of July.
Speaking at a NorthRow event entitled “Compliance change is coming, are you ready?”, Martin Woods, chair of the advisory board of the Global Compliance Institute, said that the proposals were "not going to be a huge overhaul; it is tweaking around the edges”.
Nonetheless, this may have a huge effect on the compliance of regulated entities, Sian Lewin, co-founder of RegTech Associates, added.
Panellists thought that the regulatory update will result in an expansion of the Companies House reporting duty.
If a financial institution finds that its information about a new client’s beneficial ownership does not match that held in Companies House, it is obliged to inform the agency about the discrepancy. However, it only has to do so when it has established a new business relationship with that customer.
The Treasury now proposes to change this by requiring financial firms to report discrepancies in information about beneficial ownership continually.
It is largely making this change because financial institutions have alerted Companies House to more than 35,000 such discrepancies since the latest iteration of the MLRs came into force in January 2020.
“The change for that is that now you are going to have to notify them on an ongoing basis. So in line with your ongoing KYC [know your customer], you will be notifying Companies House of the discrepancies you identify,” Woods explained.
Woods thought that in an example of 2,000 reports there may be 40 to 50 with discrepancies of different types. In some cases the address might not exist, or the addressee might not have permission to use the address, or the company might be unknown at the address.
These discrepancies do not necessarily indicate criminal activity but they do result from the fact that Companies House has still not adopted a 21th century technology.
Citing Jeffrey Robinson, the author of "The Laundrymen", Woods said “dirty money is like water; it constantly seeks the place of least resistance”.
One of these places is Companies House, Woods said. If the venerable institution is not digitalised, “it is like one-day plumbing — if you are not looking after your plumbing, you will find you have weaknesses that money launderers exploit”.
Woods thought that the other major effect of the amendments to the MLRs would take place in the crypto-asset industry.
The amendments, if they become law, will force crypto-asset firms to collect personal information about the originators and beneficiaries of crypto-asset transfers of more than £1,000. The provision that calls for this is FATF’s so-called travel rule.
Woods believed that the crypto-industry was keen to be regulated because regulation could give it access to a wider range of customers.
The consultation about the amendments runs until October 14.
