HM Treasury is consulting on the government’s proposed approach to implementation of the EU fourth money laundering directive in the UK (see www.bit.ly/2caIqU0). The directive was published in the EU Official Journal on 5 June 2015 and seeks to give effect to the updated FATF standards. All EU member states, including the UK, have two years to transpose the requirements of the directive into national law.
The new EU fund transfer regulation accompanies the directive and will come into force alongside the directive in all member states. It updates the rules on information on payers and payees, accompanying transfers of funds, in any currency, for the purposes of preventing detecting and investigating money laundering and terrorist financing, where at least one of the payment service providers involved in the transfer of funds is established in the EU. For example, among the changes in the information required, the regulation provides that a payment service provider must verify certain elements of information for a transaction of any value, where it has received the funds in cash, or in anonymous electronic money.
The UK government proposes to introduce the Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017 in order to transpose both the directive and the fund transfer regulation. The current Money Laundering Regulations 2007 and Transfer of Funds Regulations 2007 would be revoked, with transitional provision being made to the new regulation. The government intends that the new provisions will come into force by 26 June 2017.
The main changes the government is considering include:
a reduction in the cash transaction threshold for persons trading goods from €15,000 to €10,000;
an absolute turnover threshold of £100,000, removing the current link with the VAT registration threshold;
removing the list of products subject to simplified customer due diligence and using instead the non-exhaustive list of factors in Annex II of the directive;
removal of simplified due diligence in relation to pooled client accounts;
setting a threshold for the size and nature of a business required to appoint a compliance officer and independent audit function;
exemption for certain gambling providers on the basis of proven low risk;
exemption for low risk electronic money products including non-reloadable instruments with a maximum stored value of €250, or reloadable instruments where the maximum limit of €500 can be used only in the UK;
appointment of professional or self-regulatory body supervisors of estate agents;
new definition of correspondent banking which extends the FATF definition to include relationships between and among credit institutions and financial institutions;
a ‘proportionate’ approach to politically exposed persons;
central register of beneficial ownership, including trusts
making one-off company formations subject to due diligence;
giving all supervisors an express power to refuse to register or to cancel an existing registration;
extending the criminality test to high value dealers;
no upper limit on financial sanctions.
This consultation is focused on the directive as agreed in June 2015, although the government also welcomes comments on the further amendments proposed by the European Commission in July 2016. These involve:
designating virtual currency exchange platforms and wallet providers as obliged entities;
lowering due diligence thresholds for non-reloadable prepaid payment instruments from €250 to €150 and removing the exemption for online use of prepaid cards;
giving financial intelligence units new powers to request information from any obliged entity;
enabling financial intelligence units and competent authorities to identify holders of bank and payment accounts;
harmonising EU enhanced customer due diligence measures towards high-risk third countries;
public access to beneficial ownership information; and
interconnection of national central registers.
The EU Parliament’s Committee on Economic and Monetary Affairs recently put forward amendments to delay implementation of these additional measures by 12 months until 1 January 2018 (see www.bit.ly/2cXxMVn).
HM Treasury is consulting on the government’s proposed approach to implementation of the EU fourth money laundering directive in the UK (see www.bit.ly/2caIqU0). The directive was published in the EU Official Journal on 5 June 2015 and seeks to give effect to the updated FATF standards. All EU member states, including the UK, have two years to transpose the requirements of the directive into national law.
The new EU fund transfer regulation accompanies the directive and will come into force alongside the directive in all member states. It updates the rules on information on payers and payees, accompanying transfers of funds, in any currency, for the purposes of preventing detecting and investigating money laundering and terrorist financing, where at least one of the payment service providers involved in the transfer of funds is established in the EU. For example, among the changes in the information required, the regulation provides that a payment service provider must verify certain elements of information for a transaction of any value, where it has received the funds in cash, or in anonymous electronic money.
The UK government proposes to introduce the Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017 in order to transpose both the directive and the fund transfer regulation. The current Money Laundering Regulations 2007 and Transfer of Funds Regulations 2007 would be revoked, with transitional provision being made to the new regulation. The government intends that the new provisions will come into force by 26 June 2017.
The main changes the government is considering include:
a reduction in the cash transaction threshold for persons trading goods from €15,000 to €10,000;
an absolute turnover threshold of £100,000, removing the current link with the VAT registration threshold;
removing the list of products subject to simplified customer due diligence and using instead the non-exhaustive list of factors in Annex II of the directive;
removal of simplified due diligence in relation to pooled client accounts;
setting a threshold for the size and nature of a business required to appoint a compliance officer and independent audit function;
exemption for certain gambling providers on the basis of proven low risk;
exemption for low risk electronic money products including non-reloadable instruments with a maximum stored value of €250, or reloadable instruments where the maximum limit of €500 can be used only in the UK;
appointment of professional or self-regulatory body supervisors of estate agents;
new definition of correspondent banking which extends the FATF definition to include relationships between and among credit institutions and financial institutions;
a ‘proportionate’ approach to politically exposed persons;
central register of beneficial ownership, including trusts
making one-off company formations subject to due diligence;
giving all supervisors an express power to refuse to register or to cancel an existing registration;
extending the criminality test to high value dealers;
no upper limit on financial sanctions.
This consultation is focused on the directive as agreed in June 2015, although the government also welcomes comments on the further amendments proposed by the European Commission in July 2016. These involve:
designating virtual currency exchange platforms and wallet providers as obliged entities;
lowering due diligence thresholds for non-reloadable prepaid payment instruments from €250 to €150 and removing the exemption for online use of prepaid cards;
giving financial intelligence units new powers to request information from any obliged entity;
enabling financial intelligence units and competent authorities to identify holders of bank and payment accounts;
harmonising EU enhanced customer due diligence measures towards high-risk third countries;
public access to beneficial ownership information; and
interconnection of national central registers.
The EU Parliament’s Committee on Economic and Monetary Affairs recently put forward amendments to delay implementation of these additional measures by 12 months until 1 January 2018 (see www.bit.ly/2cXxMVn).
