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UK Banking Regulations Tackle Financial Crime, Money Laundering Concerns
The UK government has introduced several pieces of legislation aimed at tackling financial crime, money laundering, and terrorist financing. The latest developments in these regulations have significant implications for banks and other financial institutions operating in the country.
Money Laundering Regulations 2017
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 set out the main anti-money laundering requirements for firms. Since then, there have been several amendments to these regulations. The most recent changes include the Money Laundering and Terrorist Financing (Amendment) Regulations 2023, which came into effect on January 10, 2024. These regulations require enhanced due diligence on domestic politically exposed persons (PEPs) to be less stringent than that applied to foreign PEPs.
Additionally, HM Treasury is currently consulting on improving the effectiveness of the MLRs 2017 from March 11 to June 9, 2024. The consultation aims to gather feedback on how to strengthen these regulations and ensure they remain effective in preventing financial crime.
Proceeds of Crime Act 2002 and Terrorism Act 2000
The Proceeds of Crime Act 2002 and the Terrorism Act 2000 set out the main requirements for reporting suspicious activity to the National Crime Agency (NCA) and related offences. These laws are crucial in combating money laundering, terrorist financing, and other financial crimes.
Economic Crime Act 2022 and Economic Crime and Corporate Transparency Act 2023
The Economic Crime (Transparency and Enforcement) Act 2022 introduced a register of overseas entities holding UK real estate, strengthened unexplained wealth orders, and a strict civil liability test for monetary penalties for sanctions enforcement. The Economic Crime and Corporate Transparency Act 2023 went further by introducing reforms to Companies House, measures to prevent the abuse of limited partnerships, and additional powers to seize and recover suspected criminal cryptoassets.
Changes to UK Company Law
The Economic Crime and Corporate Transparency Act will introduce several changes over the next few years. These include reforms to address concerns around complexity and enforcement in the confiscation regime, as well as enabling corporate bodies or partnerships to be held criminally liable for certain offences.
UK Sanctions Regime
The Sanctions and Anti-Money Laundering Act 2018 provides the main legal basis for the UK to impose, update, and lift sanctions. The government has also introduced measures to improve the effectiveness of these sanctions in combating financial crime.
Criminal Justice Bill
The Criminal Justice Bill includes economic crime measures aimed at reforming the confiscation regime, enabling corporate bodies or partnerships to be held criminally liable, and introducing a voluntary suspended funds scheme.
Independent Review of Disclosure and Fraud Offences
A recent independent review of disclosure and fraud offences has highlighted concerns around the effectiveness of these laws in combating financial crime. The review suggested imposing sanctions on prosecutors who miss deadlines and defendants who fail to engage, as well as exploring the potential use of artificial intelligence (AI) to support the criminal disclosure regime.
Conclusion
These latest developments in UK banking regulations demonstrate the government’s commitment to tackling financial crime and money laundering concerns. Financial institutions operating in the country must ensure they are compliant with these regulations to avoid legal consequences and reputational damage.