On June 26, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (Regulations) went into effect in the United Kingdom, having been presented to Parliament on June 22. The Regulations represent the implementation of the EU 4th Money Laundering Directive (4MLD). The Regulations replace the UK’s Money Laundering Regulations 2007.
The Regulations enhance anti-money laundering requirements for the firms it applies to (known as “relevant persons”) in a number of ways, including:
- Risk Assessments: the Regulations require a relevant person to analyze its business’s potential exposure to money laundering or terrorist financing. They must then record, in writing, the assessment it has made addressing factors such as its customers, countries of operation, products and services, transactions, delivery channels, and the size and nature of the business. The relevant person must then translate the findings of this process into written policies;
- Level of Due Diligence: the circumstances in which simplified customer due diligence (SDD) is permissible but will become more restricted; there will cease to be “automatic” SDD requirements for any transactions. Instead, a relevant person will need to assess customer, transaction and geographic risk factors in deciding whether SDD is appropriate. The Regulations also contain a list of factors that, if involved in a transaction, will make enhanced due diligence (EDD) compulsory;
- Reliance on Third Parties: relevant persons will still be able to rely on the customer due diligence carried out by a third party if that third party is either subject to the Regulations or an equivalent regime. However, the third party must enter into a written agreement under which it agrees to immediately provide requested copies of all client due diligence documentation in respect of the customer, its beneficial owner or anyone acting on behalf of the customer; and
- Politically Exposed Persons (PEPs): EDD will now apply to local PEPs as well as overseas PEPs.
The Regulations are available here.