January 9, 2020 Money Laundering regulations updated
Amidst the packed programme of Brexit and other legislation which the government put into play before Christmas, one regulation change may have slipped through almost unnoticed. Passed on 20 December 2019, some elements of ‘The Money Laundering and Terrorist Financing (Amendment) Regulations 2019’ come into effect on 10 January 2020.
The reason for the short time scale between legislation and implementation relates to the UK’s ongoing membership of the EU, thereby having to comply with the EU’s Fifth Money Laundering Directive. Interestingly, although these new regulations were subject to consultation in 2019, the result of the consultation has yet to be published. Nevertheless the UK’s regulatory authorities including the FCA have announced that they expect businesses to comply with the regulations from 10 January or provide evidence that sufficient steps have been taken to enable compliance.
The first major amendment expands the types of business which are now covered by the regulations. In particular:
- The definition of tax adviser now covers those who offer material aid or assistance on tax matters,
- The definition of businesses within the property agency sector now includes the letting agency sector for high value transactions with a monthly rent of EUR 10,000 or more,
- Art market participants including art galleries, auction houses and freeport operators are now covered by the legislation for transactions exceeding EUR 10,000,
- Cryptoasset exchange providers and custodial wallet providers are also brought into the scope of the regulations.
Businesses covered by the amendments will need to refer to the FCA for guidance in respect of registration. For example, beneficial owners, officers and managers of these businesses will have to apply by 10 January 2021 for approval under regulation 26 of the MLRs. In addition, cryptoasset businesses will have to apply for FSA registration within the same timescale.
Another change of note is the requirement for firms covered by the legislation to update their records in respect of the beneficial ownership of corporate clients. This includes building an understanding of the ownership and control structure of corporate customers alongside a requirement to report to Companies House any discrepancies between the information gleaned and that showing on the Companies House register.
The definition of high risk factors has also been expanded and there are also changes to e-money thresholds for customer due diligence. Relevant persons also have to ensure that they undertake risk assessments prior to the launch or use of new products, business practices or technologies.