A large volume of transactions takes place on a daily basis and this number has only increased with the introduction of online financial services and products. When money is constantly being transferred from one person or location to another, there is also a risk of illegal financial activities.

One such activity is money laundering, which includes how criminals change money and other assets into clean money or assets with no obvious link to their criminal origins. Money laundering is a key concern of financial services as well as Government bodies as it can undermine the integrity and stability of financial marketing and institutions.

Money laundering costs the United Kingdom (UK) at least £37 billion every year and HM Treasury describes it as a key enabler of serious and organized crime.

A report titled ‘National risk assessment of money laundering and terrorist financing 2020’ published by the UK Government found that financial services, money service businesses, and cash continue to be high-risk areas of money laundering.

“However, new methods continue to emerge within these, as criminals adapt to increased restrictions and exploit vulnerabilities in different sectors and emerging technology. The growth and integration of financial technology firms for example presents criminals with new intermediaries and methods to abuse in this sector,” the report stated.

Cryptocurrencies, for instance, pose significant risks. Requirements for cryptoasset exchanges and custodian wallet providers were introduced for the first time through the European Union’s Fifth Anti-Money Laundering Directive (5MLD).

The EU’s 5MLD has played a key role in anti-money laundering regulations and the UK had to ensure the requirements of 5MLD came into effect through national law by 10 January 2020. This resulted in several amendments being made to the UK’s regulations on money laundering.

In the UK, the key regulatory framework concerning money laundering is the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017. It has played a key role in implementing anti-money laundering (AML) policy in the UK and ensuring organizations carry out customer due to diligence measures and risk assessments.

The Regulations came into force in June 2017 and several amendments have been made to them since. This year, for instance, an amendment was made with regard to the high-risk countries identified under the Regulations.

Various bodies have been appointed as AML supervisors, including accountancy professional bodies and legal professional bodies. The three statutory AML supervisors are HM Revenue and Customs, The Gambling Commission, and the Financial Conduct Authority (FCA).

The FCA has published important information about anti-money laundering, including new areas that organizations are required to comply with following amendments made to the Money Laundering Regulations in 2020. These amendments are a result of 5MLD.

The amendments to the AML regulations require organizations to include additional high-risk factors when assessing the need for enhanced due diligence. These factors include transactions between parties based in high-risk third countries, customers who are beneficiaries of a life insurance policy, and e-money thresholds for customer due diligence.

The amendments reduced the maximum amount of money that can be stored electronically from €250 to €150.

The amendments also cover reporting discrepancies to Companies House, compliance under money laundering regulations, and cryptoasset activities.

There are several such amendments and the revised regulations cover a range of topics and areas. This is why it is important that organizations closely study these new areas of compliance and ensure their policies and procedures meet the country’s latest AML requirements.

Given the importance of AML regulations, however, an organization may have concerns regarding in-house expertise and resources to handle this area of compliance.

A law firm UK can be immensely helpful in this regard. Experts and professionals can simplify anti-money laundering requirements so that the business owners are aware of registration, reporting, and compliance checks.

Boutique consulting firms, for instance, would tell the business owners or management that penalties may be charged if the organization fails to comply with anti-money laundering regulations. This would add pressure on organizations to update their existing policy and follow procedures.

If you consider registration, a business can benefit from corporate legal services that make the registration processes easier and smoother. From looking up the latest amendments to know if the organization should register with a supervisory authority to implementing AML policies within the organization, boutique consulting firms can be of great service to organizations.

There are thus several reasons why outsourcing legal services and operations are beneficial to organizations, especially when it comes to anti-money laundering regulations.

Published date - June 14, 2021