What are the changes to UK money laundering regulations?

There are noteworthy changes to the UK’s money laundering regulations (“MLRs”). Unusually, these include obligations on customers with accounts in which money is pooled (in addition to the regulated firm providing the ‘pooled’ or ‘segregated’ account).

In this Keynote, Financial Services partner Simon Deane-Johns gives an overview of the changes coming into force.

The changes

• Monetary amounts are now in GBP on a 1:1 basis, so those thresholds/limits increase (since €10k is about £8,600 at time of posting), except where that would risk failing to meet the Financial Action Task Force (“FATF”) recommendations.

• The practice of selling “off-the-shelf” companies is now specified among the activities  which qualify the seller as a “trust or company service provider” and establishes a ‘business relationship’, thereby triggering the need for KYC etc.

• Any firm subject to the MLRs which provides a customer with a “pooled account” must undertake additional customer due diligence (CDD) measures to understand the purpose and determine/address the risk of money laundering/terrorist financing. Unusually, the customer must also maintain written records for 5 years, and provide information to the account provider and the authorities on request, in respect of the pooled account. That obviously assists the account provider and the authorities in meeting their own AML/CTF obligations. While the customer’s breach of these obligations could provide a basis for suspending or closing the pooled account contractually, it does not seem to be among the direct offences specified in the MLRs.

• The triggers for ‘letting agents’ and ‘art market participants’ to conduct CDD are now the same as those for ‘high value dealers’ (£10k).

• Banks who take on customers from an insolvent bank can allow those customers to open an account and transact prior to completing full CDD measures (or enhanced due diligence (EDD), where relevant). The new bank only needs to identify the customer rather than verify their identity at the initial stage (or identify the person purporting to act on the customer’s behalf and verify that such person has that authority). The need to verify the identity and report discrepancies in the registers related to such customers are disapplied for that initial onboarding phase.

• The definition of a “high-risk third country” has been replaced by reference to a “FATF call for action country” to align with the trigger for deeming a country ‘high risk’ from an AML/CTF standpoint.

• Also consistent with FATF recommendations, cryptoasset businesses must conduct EDD in relation to their “correspondent relationships” (specifically defined for this context, as opposed to traditional correspondent relationships for credit/financial institutions).

• Trusts which acquired an interest in UK land before 6th October 2020 and continue to hold that interest on 30 June 2026 must register with HMRC (other than 22 excluded trusts), but a liability to pay Stamp Duty Reserve Tax (SDRT) will not result in a trust becoming a ‘taxable trust’ that must be registered.

• The MLRs are now aligned with the new FCA regime for cryptoassets, so that a cryptoasset exchange or custodian wallet provider that is registered under the MLRs before 25th October 2027 must also give notice of a change of control within the meaning of Financial Services and Markets Act 2000 (FSMA).

If you have questions or concerns about the money laundering regulations, please contact Simon Deane-Johns.