HM Treasury has recently proposed amendments to the Money Laundering Regulations to encourage a risk based approach to anti money laundering compliance and thereby reduce the regulatory burden on SMEs.
The proposals include:
- The removal of some or all of the existing criminal penalties under the Regulations. Currently certain individuals within a firm responsible for anti money laundering could face prosecution if they failed to have adequate systems in place to counter the risks of money laundering. However there is evidence that such criminal penalties inhibit firms from taking a risk based approach to anti money laundering. Such an approach is much more cost effective and less burdensome. Removal of the criminal penalties would inspire greater confidence in SMEs. Sanctions would remain, but these would be civil in nature.
- Greater allowance for certain sectors to place reliance on customer due diligence checks.
- Lifting or limiting the regulatory burden on some very small businesses (those with sales less than £13,000).
While most large financial institutions will not alter their behaviours in line with the suggested amendments, smaller businesses will see some benefits.
Although I would still advise caution for all types of institution, regardless of their size – money launderers are clever, resourceful and determined.
Comments on the proposals can be made under 30 August 2011. The suggested changes to the regulations will take effect from 2012.