The UK government has published its long-awaited response to a consultation on existing Money Laundering Regulations (MLRs), outlining a series of targeted reforms aimed at strengthening anti-money laundering (AML) controls.

The proposals, which form part of the government’s Economic Crime Plan 2023-2026, point clearly to more targeted regulation, the aim for increased transparency and stronger supervision, with significant implications for regulated professionals, particularly accountants, trust and company service providers, and professional body supervisors (PBSs).

Mike Miller, ICAEW Economic Crime Manager, says: “For the accountancy profession, the message is one of heightened expectations. Firms must continue to apply a robust, risk-based approach to AML compliance, while remaining agile to future reforms in supervision and guidance.”

Although the practical burden may increase in some areas, especially for those dealing with trusts, companies or client money, Miller says the focus remains on proportionality, with reforms intended “not only to close loopholes, but also to streamline obligations where possible”. The profession now has a critical role to play in implementing these changes effectively, he says, and supporting clients through an evolving regulatory landscape.

Customer due diligence and risk-based requirements

A central area of reform is the government’s intention to strengthen and clarify the application of customer due diligence (CDD) requirements.

Money laundering regulations already require regulated firms to conduct CDD and apply enhanced due diligence (EDD) in certain circumstances, such as where clients are based in high-risk third countries or where there is a complex ownership structure. The government is proposing to update these provisions to ensure more effective targeting of genuinely high-risk activity.

This will include clarifying EDD rules in relation to complex transactions and imposing mandatory checks for high-risk third countries on jurisdictions subject to a Financial Action Task Force Call for Action, to support a risk-based approach. 

There are planned changes to CDD requirements in relation to pooled client accounts to help increase access to these types of accounts, while maintaining appropriate safeguards.

Firms will need to ensure their staff are appropriately trained to identify high-risk transactions and to escalate issues for further investigation where necessary. These clarifications may also lead to updates in guidance issued by the PBSs and the Joint Money Laundering Steering Group.

Trust registration and transparency measures

Another notable reform is the closure of a previously identified loophole in the UK’s trust registration framework. Under the current regime, only certain trusts are required to register with HMRC’s Trust Registration Service (TRS). However, the government has confirmed that all non-UK trusts that hold an interest in UK land or property acquired before 6 October 2020 will now be required to register, regardless of whether the trust has UK-resident trustees.

The government will introduce a de minimis exemption for certain trusts currently required to register on TRS. The intention is to simplify the criteria in determining whether a trust qualifies for a de minimis exemption so that it is understood, easily verified and monitored.

For accountants involved in tax planning, estate administration or private client services, these reforms may require additional due diligence at the point of instruction and potentially during ongoing engagements. Clients may also need support in navigating the TRS process and understanding their new obligations.

Supervision and professional body reform

The government has signalled its intention to continue to reform the UK AML supervisory model, which currently uses an array of PBSs, including ICAEW. The Institute has outlined its position on these reforms in detail in separate articles and through its formal response. The government has proposed strengthening the role and powers of the Office for Professional Body Anti-Money Laundering Supervision, improving information sharing between supervisors and reviewing the number and effectiveness of existing PBSs. While the government has not yet made a concrete proposal for reform, the tone of the response suggests a desire to see improvements in coordination, consistency and enforcement.

Company service providers and beneficial ownership

The government also intends to tighten controls on the formation and sale of UK companies, particularly where those services are offered ‘off-the-shelf’ or through intermediaries. They plan to amend the MLRs to add the sale of off-the-shelf companies to activities that are within the scope of regulated trust or company service provider activity.

Many accountants are active in the company formation space or provide ongoing corporate administration services. The sale of ’off-the-shelf companies will be in scope of the MLRs and firms may need to adjust their onboarding checks, contractual terms and monitoring processes to remain compliant. The reforms also reflect a broader push by Companies House and law enforcement to increase transparency of beneficial ownership and prevent abuse of corporate structures.

Cryptoassets and emerging risk areas

While primarily aimed at cryptoasset service providers, new money laundering requirements may also affect accountants who advise or audit clients operating in crypto markets. The government is seeking to ensure that all crypto service providers are appropriately registered and monitored, and that changes in ownership or control are subject to regulatory scrutiny. Members advising start-ups, fintechs, or high-net-worth clients with crypto holdings should be alert to these changes and consider whether additional AML safeguards are appropriate.

Next steps and implementation

The government intends to introduce a draft statutory instrument later in 2025, which will contain the legal amendments to the MLRs. Before that instrument is laid before Parliament, there will be a short period of technical consultation to ensure the changes are workable and clearly drafted. In parallel, supervisors and regulators will work together to update sector-specific guidance to reflect the new requirements.

ICAEW involvement in the consultation

The government received more than 200 responses to the consultation, including from ICAEW, many of which highlighted inconsistencies in application, gaps in supervision and areas where regulatory burdens outweighed the benefit in terms of financial crime prevention. In parallel, HM Treasury and the Home Office have published the UK’s National Risk Assessment of money laundering and terrorist financing 2025, which identifies key evolving threats.