The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 were laid before Parliament on 20 December 2019 and, with a couple of exceptions, come into force on 10 January 2020. These Regulations amend rather than replace the 2017 Regulations.
As with the 2017 Regulations the amendments have been issued with very little time to implement the required changes before the effective date. Also, at the time of writing, updated CCAB guidance is not yet available.
A copy of the new Regulations can be downloaded from the legislation.gov.uk website here.
The main changes to the Regulations that are of direct relevance to accountancy firms are:
- The definition of tax adviser has been extended from simply providing advice about the tax affairs of other persons to include material aid, or assistance or advice, in connection with the tax affairs of other persons, whether provided directly or through a third party. This will impact firm’s that work closely with a third party such as a solicitor or IFA.
- A firm’s policies, controls and procedures must include the measures taken to address the impact of new products and new business practices (including new delivery mechanisms) as well as the current requirement to address new technology.
- The requirement to ensure relevant employees are trained properly is extended to any agents (such as sub-contractors) used by the firm.
- CDD must be updated where the firm has a legal duty to contact a client for the purpose of reviving information relevant to the risk assessment or that relates to beneficial ownership or control.
- There is now an explicit requirement to understand the ownership and control structure where the client is an entity. This is not new, it is just now stated explicitly as a requirement.
- There are more rigorous checking and documentation requirements where a firm is unable to identify the beneficial owners and has treated the senior person in an entity as the beneficial owner.
- Electronic identification is explicitly stated as being a reliable source of evidence provided certain conditions are met. Note that this does not mean that electronic identification is required.
- For entities required to maintain a PSC register, there is a requirement to review that register and report any discrepancies to the registry. So, in the case of a company or LLP any discrepancies would have to be reported to Companies House.
- The requirement to apply enhanced due diligence now applies where a transaction is complex or unusually large, there is an unusual pattern of transactions or they have no apparent economic or legal purpose. The change is to amend the ‘and’s in the previous version to ‘or’s meaning that any one of the above factors can trigger enhanced due diligence rather than needing a combination.
- The approach to high risk countries is more specific and the enhanced due diligence required set out in more detail.
- The registration requirements for trusts without tax consequences will be set out in separate regulations.
Other changes that may be relevant to a firm’s clients include extension of the regulated sector for AML purposes to include:
- Cryptoasset exchange providers and custodian wallet providers with regulation by the FCA.
- Letting agents in cases where a property is let for a month or more and the monthly rent during at least part of the term is equivalent to 10,000 euros or more. Regulation will be by a professional body or HMRC.
- Art market participants (storing, trading in or acting as an intermediary in the sale or purchase of works of art) where the value of the transaction or a series of linked transactions is 10,000 euros or more. Regulation will be by HMRC.
A more detailed analysis of the changes will be circulated to subscribers of the Mercia authored AML systems pending issue of the updated CCAB guidance. However, we do not intend to update those systems until the updated CCAB guidance is issued.