The government has published its response to the HMT consultation entitled: Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 Statutory Instrument 2022, which concluded in October 2021. The Statutory Instrument has been laid in Parliament.
Many of the changes do not impact on the accountancy sector. However, there are a few key areas for ICAEW firms to be aware of:
- The government has expanded the discrepancy reporting requirement to cover the ongoing business relationship. This means that when an ICAEW firm undertakes ongoing customer due diligence it will also be required to report discrepancies against information held on the appropriate register as they would have under the existing provisions under Regulation 30A.
This should provide significant additional information on discrepancies, helping to identify those who seek to undermine the UK’s open business environment for the purpose of facilitating economic crime. The government has also decided to streamline the requirement so that it is clear only ‘material discrepancies’ need to be reported, and to provide a list setting out which types of discrepancy would be ‘material’. This should help to mitigate the increased compliance obligations associated with the expansion of the regime. This requirement will come into force in April 2023, to tie in with other Corporate Reform measures, and powers to be awarded to Companies House to query information on the register.
- The government brought forward the Economic Crime (Transparency and Enforcement) Act to crack down further on dirty money and corrupt elites in the UK. The Act introduced a new public Register of Overseas Entities (ROE) owning UK property to sit alongside the existing public registers hosted by Companies House. The government has therefore decided to expand the discrepancy reporting regime to extend the requirement to include entities on the ROE.
- From 1 September 2022, there will be a new requirement for all supervised firms to perform a proliferation financing (PF) risk assessment (similar to the AML firm-wide risk assessment) so that each firm can assess the risk it may be used to enable proliferation financing. A definition of PF will be included in the Money Laundering Regulations (MLRs) to clarify the type of activity that would be considered PF.
- There will be a new, clear legal gateway for AML and Counter Terrorist Financing supervisors to access, view and consider the quality of the content of Suspicious Activity Reports (SARs) submitted by supervised populations, provided they are necessary to fulfil supervisory functions. This will help standardise the approach to accessing SARs and clarifies the right of access to support supervisors in delivering their supervisory obligations under the MLRs (by allowing supervisors to review and provide feedback on SARs to their supervised population).
Accessing and assessing the SARs of their supervised population also allows supervisors to obtain and identify information and intelligence to help better inform their understanding of sectoral risks, to be able to tailor guidance and, ultimately, to improve the effectiveness of their risk-based approach to supervision.
- Regulation 52 will be amended to expand the intelligence and information-sharing gateway to allow for reciprocal sharing from relevant authorities (specifically law enforcement) to supervisors; expand the list of ‘relevant authorities’ to explicitly include certain parts of the Department for Business, Energy and Industrial Strategy (BEIS), to support their functions under the MLRs; and enable the Financial Conduct Authority to disclose the confidential information it receives, in relation to its MLR duties, more widely.
These changes are expected to have a positive impact on the overall objectives under the Economic Crime Plan to increase intelligence and information-sharing, particularly between the public and private sectors, and aim to provide more opportunities for a whole system approach to remove bad actors and those seeking to exploit the UK for criminal purposes.
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