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The 8 key changes brought by the new AML regulations

7th Aug 2017
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The Government has introduced new Anti-Money Laundering legislation, which brings various changes to comply with the European Fourth Money Laundering Directive.

The new Anti-Money Laundering (AML) legislation, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, came into force on 26 June 2017, replacing the previous Money Laundering Regulations 2007.

The 2017 Regulations implement the proposals of the European Fourth Money Laundering Directive, which was published in 2015. The new legislation aims to make the UK a more hostile place for money launderers and terrorist financers.

These are the 8 key changes introduced by the new regulations:

  1. Company Formations: Under the 2007 Regulations, the requirement to conduct due diligence on everyone wishing to form a UK company was only mandatory under some circumstances. However, the 2017 Regulations classify a one-off company formation as a business relationship, giving rise to due diligence requirements.
  2. PEPs (Politically Exposed Persons): Previously, Enhanced Due Diligence was only needed when doing business with foreign PEPs. The 2017 Regulations have widened the PEP definition so that it also includes national PEPs. PEPs will be considered to be low or high risk depending on factors such as the political stability of their country of origin.
  3. Simplified due diligence: The UK Government will provide a non-exhaustive list of factors where simplified due diligence may be appropriate. Compliance practitioners will now need to consider each case on its merits and document their rationale for instances where they feel simplified due diligence is appropriate.
  4. Widening the definition of beneficial ownership: Whilst the 2017 Regulations stop short of lowering the beneficial ownership threshold from >25% to >10% shareholders, the definition of beneficial ownership has been extended to include those persons with significant control of a company (PSCs).
  5. Central Register of Trusts: HMRC will launch a central register of beneficial owners of express trusts with tax consequences during 2017. This will mandate trustees to provide HMRC with details of all natural or legal persons with control over the trust. However, unlike the beneficial ownership register of UK companies, this will not currently be made public.
  6. People with Significant Control: AIM companies are no longer exempt and changes to a UK company’s PSC register now need to be filed within 28 days of the change.
  7. Independent Audit Function: Having regard to the size and nature of a business, there is now a requirement to appoint a member of the board as an officer for compliance with the 2017 Regulations. It will also be necessary to establish an independent audit function to evaluate the effectiveness of the company’s AML policies/procedures.
  8. Risk Assessment: The Treasury, The Home Office, Supervisory Bodies & businesses supervised for compliance with the 2017 Regulations must each produce a risk assessment based on the money laundering & terrorist financing risks the UK, entities the supervisory body oversee and supervised companies face.

Would you like to know more about these changes and how the future of the AML regime may affect you? Contact us for more information.

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