24.02.2020

Money Laundering and Terrorist Financing (Amendment) Regulations 2019

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 were laid before Parliament.

The Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (‘MLRs 2017’) transposing the Fifth Money Laundering Directive (‘MLD5’) in the UK, aligning the UK Regime with the Financial Action Task Force’s (‘FATF’) International Standards.

New Relevant Persons

Part 2 of the ‘MLRs’ has been amended to expand the scope of Regulated Sectors, adding new categories of Relevant Persons subject to the requirements of the ‘MLRs’, including Registration and Customer Due Diligence Requirements. Letting Agency Businesses, Art Market Participants and Crypto-asset [1] Exchange Providers and Custodian Wallet Providers are also brought into scope of the ‘MLRs’, to ensure the UK meets evolving local standards and fully addresses emerging risks.

Customer Due Diligence and Enhanced Due Diligence

The Instrument makes amendments to Part 3 of the ‘MLRs’ in relation to ‘CDD’ measures to be taken by Regulated Businesses.

Letting Agency Businesses must apply ‘CDD’ measures in relation to both the Tenant and Landlord for Rental Agreements, with a monthly rent of EUR 10,000, or more
Art Market Participants must apply ‘CDD’ measures when undertaking transactions equivalent to EUR 10,000, or more, in relation to the sale of a work of art
‘CDD’ measures must also be carried out by Crypto-asset Exchange Providers and Custodian Wallet Providers entering into a business relationship and in other specified cases in line with other Relevant Persons Crypto-asset Automated Teller Machine Operators must also carry out ‘CDD’ for all Exchanges of Money for Crypto-assets, whatever the amount

Policies, Controls and Procedures

Part 2 of the ‘MLRs’ has also been amended to address ‘FATF’s’ recommendation concerning the Policies, Controls and Procedures for Regulated Businesses. Relevant Persons must ensure that they have Policies to ensure Risk Assessments are conducted prior to the launch, or use of New Products, or Business Practices, as well as new technologies. In addition, Parent Undertakings must ensure they have Group-Wide Policies on sharing information about Customers, Customer Accounts and Transactions for ‘AML’/’CTF’ purposes.

Relevant Persons must also take appropriate measures to ensure Agents used for the purposes of its Regulated Business receive ‘AML’/’CTF’ training, ensuring a ‘First Line of Defence’ against illicit finance.

Bank Account Portal

The Instrument inserts a new Part 5A into the ‘MLRs’, requiring the establishment of a mechanism for the Financial Intelligence Unit and Competent Authorities to access details pertaining to UK Bank Accounts, Building Society Accounts, certain Credit Union Accounts and Safe Deposit Boxes.

Supervision, Approval and Registration

In Part 6 of the ‘MLRs’, the Instrument makes amendments in relation to Supervision, Approval and Registration. The Financial Conduct Authority must maintain a Register of Cryptoasset Exchange Providers and Custodian Wallet Providers, whilst Her Majesty’s Revenue and Customs may maintain a Register of Letting Agents and Art Market Participants. Relevant Firms must register within 12 months of the register being established.

Crypto-asset Businesses

The Instrument inserts new Regulations (56A and 58A) amongst other amendments to Part 6 of the ‘MLRs’, which outline requirements for Crypto-asset Businesses and the ‘FCA’s’ duties when registering these Businesses.

From 10 January 2020, new Crypto-asset Businesses must be registered before they can undertake Crypto-asset Activity. A Transitional Period for Cryptoasset Businesses operating prior to that date will last until 10 January 2021.

Additionally, where the Crypto Activity is not subject to the protections of the Financial Ombudsman Service and/or the Financial Services Compensation Scheme, Crypto-asset Exchange Providers and Custodian Wallet Providers must inform the Customer that the Activity is not subject to such protections.

The Legislation implements the 5th Money Laundering Directive (‘5MLD’) and will become effective on 10 January 2020.

Firms should ensure that Risk and Compliance, Financial Crime, Relationship Management, Operations and Change Management Teams are aware and make appropriate changes to Policies, Processes and Procedures.

Relevant Firms must also ensure that they are registered with ‘HMRC’ (as above).

Firms should also ensure that, in line with their Governance Arrangements, Senior Management / Executive Teams, Risk and Compliance and Audit Committees are appraised accordingly.

[1] The UK government has adopted the definition of ‘Crypto-asset’ in the Regulations, rather than the term ‘Virtual Currency’. The UK’s Crypto-asset Task force previously set out that ‘Crypto-asset’ includes Exchange, Security and Utility Tokens. HM Government considers all Relevant Activity involving all three types of Crypto-assets should be captured in ‘AML’/’CTF’ Regulation.

Firms are advised to review the legislation with the Executive / Senior Management Team, with the input of Compliance/Legal team, identifying the likely impact upon their business, also keeping their Board and Audit Committee appraised.

Firms newly caught by the AML/CTF regime, especially crypto businesses, should ensure they understand their compliance obligations and should start preparing and establishing relevant policies and procedures and an implementation plan with the required actions and timeline.

From 10 January 2020, new crypto-asset businesses must be registered before they can carry on crypto-asset activity. A transitional period for cryptoasset businesses operating before that date will last until 10 January 2021.

Further information:
To read more, please follow this link:

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019
http://www.legislation.gov.uk/uksi/2019/1511/contents/made

Explanatory Memorandum
http://www.legislation.gov.uk/uksi/2019/1511/memorandum/contents