ECSH21025 - Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) came into force on 26 June 2017 replacing the Money Laundering Regulations 2007 and the Transfer of Funds (Information on the Payer) Regulations 2007, with updated provisions that implement in part the Fourth Money Laundering Directive (4MLD or “the Directive”) 2015/849/EU and the Funds Transfer Regulation (FTR) 2015/847/EU. It represented a significant overhaul of the UK Anti Money Laundering (AML) regime.

Some key new elements of MLR 2017 are:  

  • A new approvals test for High Value Dealers (HVDs), Estate Agency Businesses (EABs) and Accountancy Service Providers, (ASPs) and extension of the Fit &Proper regime for Money Service Businesses (MSBs) and Trust or Company Service Providers (TCSPs). 

  • HMRC agreed to host a central register of all businesses carrying out TCSP activities and which are not supervised by the Financial Conduct Authority (FCA). 

  • A requirement for businesses to maintain written risk assessments and policies, controls and procedures. 

  • New enforcement powers for tackling non-compliant behaviour, and a requirement to publish details of the non-compliant. 

  • The extension of EAB due diligence checks to cover both buyer and seller. 

  • New obligations for the transfer of funds supervisors (FCA and HMRC), and new obligations for payment service providers themselves. 

  • Simplified Due Diligence is no longer automatic for supervised businesses. These businesses are first required to ascertain that the business relationship or transaction presents a lower degree of risk. 

 5th EU Money Laundering Directive (5MLD) 

This entered into force on 10 January 2020, amending the 4MLD. The UK’s transitional arrangements on leaving the European Union (EU) applied; and it began transposing relevant 5MLD requirements into UK law.  

 Key elements: 

  • Extension of sectors that are now supervised businesses and in scope:  

         (a) Crypto asset exchange providers (FA-supervised) 

         (b) Custodian wallet providers (FCA-supervised) 

         (c) Letting agent businesses (LAB) 

         (d) Art market participants (AMP) 

  • Customer Due Diligence (CDD) in onboarding: recognising the growing use of electronicidentity verification (EIV)and an option to conduct EIV with a trust service.  

  • Enhanced CDD: now required for relevant transactions where either party is established in ahigh-risk third country, or transactions which are complex, unusually large, have no apparent economic or legal purpose, orwhere there are unusual patterns of transactions.   

  • Politically Exposed Persons (PEP): member states required to keep an up-to-date list of public functions. 

  • Beneficial ownership: it now requires discrepancies relating to beneficial owner information foundin the course of CDD to be reported. 

  • Pre-paid cards: CDD to be conducted to identify holders of pre-paid cards at a reduced threshold of €150 from €250.  

  • Financial Intelligence Units (FIUs) and information sharing: FIUs have the authority to obtain information from permitted authorities from the creation of a central bank account and payment transaction registers and electronic data retrieval systems, even if a Suspicious Activity Report (SAR) has not been filed. 

For more information see ECSH 21125