Review of the Money Laundering Regulations 2007

HM Treasury has issued its response to last year's review, and raised a number of proposals for amendment to the Regulations.  The response can be downloaded here.

Central to the proposals is the adoption of a more risk based approach, and the encouragement of regulated businesses to move away from a box-ticking, prescriptive risk-averse approach. Whether the abolition [3.53] of criminal sanctions for non-compliance with the Regulations will achieve this has to be questioned but the abolition would do no harm.

The 2007 Regulations are made under the FSMA 2000 but the fact remains that the anti-money laundering regulations are inextricably linked to PoCA 2002. Most practitioners, and especially those without any training in the criminal law, remain nervous over PoCA and, more particularly, untrusting of SOCA and CFG in its prosecution of the 2002 Act. In this regard, the recent case of R v Steed [2011] EWCA Crim 75  which, on the reported facts, demonstrates a ludicrously disproportionate application of the rules for confiscation orders, has done nothing to further the cause of SOCA.

Of particular note, where, as is increasingly common these days, there are a number of regulated businesses acting for one client or in one transaction, there are proposals [5.1]  to improve the reliance provisions at Regulation 17 and, possibly, also to have just one single category of professional bodies [3.62]. Anything that can sensibly be done to improve the practical application of these provisions, which seem to be well understood by lawyers and not understood whatseover by accountants, would be a big help in optimising compliance costs.

There are also proposals to improve the compliance requirements in relation to Politically Exposed Persons [6.22] and in relation to beneficial ownership [6.20].  Whilst both are problem areas, giving rise to disproportionate costs to regulated professionals, it is difficult to envisage how significant improvement can be achieved, and especially in relation to discretionary trusts.

Views on the proposals can be submitted to HMT by 30 August 2011.