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As the political debate centres on whether Brexit talks may be delayed post General Election, there is one European deadline that is not moving and that is the implementation date for the Fourth Anti-Money Laundering Directive (“4MLD”). Governments must have measures in place to transpose the Directive into national law by 26 June 2017.
The UK will implement the 4MLD via the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLR 2017”). These will replace the Money Laundering Regulations 2007 and the Transfer of Funds (Information on the Payer) Regulations 2007.
The UK Government has held a number of consultations on this issue to date, most recently on the draft Regulations back in March 2017. We are now waiting for these Regulations to be laid before Parliament. The question remains therefore whether the UK will formally meet the deadline?
Designed to give effect to updated international anti-money laundering and counter-financing of terrorism standards set by the Financial Action Task Force, the UK Government seeks to use the provisions of the 4MLD to “make the UK financial system an increasingly hostile environment for illicit finances…” However, it wishes to do this “whilst minimising the burden on legitimate businesses and reducing the overall burden of regulation…” Proportionality and applying a risk-based approach are central to the 4MLD and the UK’s approach.
That the UK financial system is a “hostile sector for money launderers” is reinforced in the Financial Conduct Authority’s Business Plan for 2017-18 with one of its key cross-sector priorities for this period financial crime and anti-money laundering.
The Business Plan 2017-2018 sets out how the FCA seeks to ensure that firms have proportionate and effective anti-money laundering controls. Highlighting that in the Retail Banking sector in particular, poor controls mean that firms might fail to identify and adequately manage money laundering risk and consumers might be “vulnerable to fraudsters”.
At the heart of the FCA’s approach to anti-money laundering is supervision and enforcement. The Business Plan refers to the Financial Crime Annual Data Return rolled out in 2016 and how analysis of these responses will ensure that it is focusing supervision on the “right firms”. The plan confirms that the FCA will continue its due diligence on firms and individuals applying for authorisation and its “proactive” supervisory assessments of firms whose business models present a “higher inherent risk of money laundering”.
It underlines that where firms have poor AML controls, “we will use our enforcement powers to impose business restrictions to limit the level of risk, provide deterrence messages to industry, or both.” The enforcement powers may include criminal powers to prosecute firms or individuals where failings are “particularly serious or repeated”.
In light of the 4MLD the Business Plan confirms that the FCA will work closely with the Treasury during the transposition period.
In doing so, the FCA issued a consultation paper - “CP17/13: Fourth money laundering directive and fund transfer regulation implementation (DEPP and EG)” – on the 12 June. The FCA paper sets out the FCA’s proposals to ensure that its guidance, policies and procedures relating to the use of its powers under the draft Regulations are up to date, effective and proportionate. It is consulting on the amendments to the decision procedure and penalties manual and enforcement guide in light of the changes that will be introduced by the Regulation.
The consultation will close on 7 July 2017 with a policy paper due to be issued as a follow up later that month.
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