Earlier this month, the Government published its Cutting red tape review of the UK’s Anti-Money Laundering and Counter Financing of Terrorism regime (see here). The review was led by the Department for Business, Energy & Industrial Strategy (BEIS) and first launched in 2015. It is one of a series of reviews and aims to identify if and where regulations are enforced in an ineffective way whilst imposing unnecessary burdens on legitimate, law-abiding businesses.
The report summarises the findings of the review in terms of the impact and consequences that the current supervisory regime has on businesses, and invites relevant regulators and departments to respond. The issues raised include, amongst others:
- The large number of complex guidance available, often duplicated and overlapping, creates confusion and unnecessary costs. This is an area that the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) is set to address when it becomes fully operational at the start of 2018 (see our related blog OPBAS: A supervisor of supervisors).
- The current policy approach, which requires companies to undertake its own risk assessment and take responsibility for this is inconsistent with many supervisors’ approach, which is often a ‘tick-box’ exercise.
- The strong focus on Customer Due Diligence checks by supervisors makes it difficult for businesses to act in accordance with their own risk assessments and deters small business, which in turn limits competition. Businesses called for supervisors to accept that resources would be better focused elsewhere in low risk situations. This is in part addressed by the FCA in their Guidance on the treatment of politically exposed persons (PEPs) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (see our related blog FCA guidance on the treatment of PEPs: a proportionate approach).
- There is an inconsistent approach between industry supervisors in terms of the separation of their enforcement, supervision and representation functions. This is another area that the OPBAS will focus on by monitoring the activities of the supervisors and working with them to ensure they meet their obligations, whilst addressing any inconsistencies in supervision.
- The cost of complying with due diligence, in particular regarding small and medium enterprises, sometimes outweighs the value of doing business in that area. This has resulted in businesses withdrawing their services from certain sectors of the economy to avoid breaching the regulations.
- The perceived reluctance from parts of the Government to share information in relation to sanctions, PEPS, and high risk country data has hindered businesses’ efforts to identify and prevent wrongdoing.
There are a number of measures being proposed by the Government in response to the issues raised: the creation of OPBAS, the introduction of the new money laundering regulations, and the proposed FCA guidance on firms undertaking a more risk based approach. However, it is clear from the review that there is more to be done. This is a timely publication in a period of change and development for the UK’s anti money laundering framework and it is hoped that the concerns and themes raised in this review will be sufficiently addressed to ensure a more streamlined, effective and consistent regime.