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New UK AML Action Plan: most significant changes in a decade

May 05th, 2016 - Posted by Sam Hemmant in Anti-Bribery And Corruption, Anti-Money Laundering

Businesses that fail to prevent money laundering or that do not have adequate procedures in place to tackle terrorist financing face new scrutiny after the British government published an action plan to tackle money laundering and corruption both in the UK and internationally.  The UK Treasury and Home Office paper, 'Action Plan for anti-money laundering and counter-terrorist finance', which has been published three weeks before Prime Minister David Cameron chairs an international anti-corruption summit in London, highlights new priorities for the government.

New priorities to tackle financial threats

The new joint UK Home Office and HM Treasury 'Action Plan for anti-money laundering and counter-terrorist finance', represents the most significant change to the UK's anti-money laundering and terrorist finance regime in more than a decade.  It focuses on three priorities:

  • Implementing a more robust response to the threat of money laundering and corrup-tion by creating aggressive new legal powers and capabilities for law enforcement
  • Reforming the supervisory regime to ensure companies that facilitate money laundering are prosecuted
  • Increasing the international reach of the UK's response to the global money launder-ing and terrorist financing threat, by working with international groups and enforce-ment agencies.

The Action Plan also places emphasis on money laundering as a "critical enabler of serious and organised crime, grand corruption, and terrorism" and represents a "new way of work-ing with the private sector".

A stronger partnership with the private sector

The Action Plan aims to bring law enforcement agencies, supervisors and the private sector together to mitigate the risk of money laundering and terrorist financing.  The regime will focus on the small number of companies believed to be engaged in or facilitating money laundering without placing unnecessary administrative burdens on lower risk firms.  The plan will investigate the effectiveness of the current supervisory regime and aims to move from a "tick box" compliance approach to one where specific risks are identified with criminal activity and actioned.

Focus on Politically Exposed Persons (PEPs) will be heightened, but will also be "robust and proportionate", with resources focused on higher risk individuals in line with international best practice.  To apply this risk-based approach, new ways for agencies to share information will be introduced, along with radical methods to ensure the approach becomes part of firms' compliance procedures.  It is clear that the emphasis will be on spotting potential criminal activity, rather than simply running through a "check list" of due diligence actions.

Enhancing the law enforcement response

New capabilities and legal powers will be integral in building a more complete intelligence picture, to enable law enforcement to disrupt money launderers and terrorists, recover crim-inal proceeds, and protect the integrity of the UK's financial system.  The government has established a Task Force, led jointly by the National Crime Agency (NCA) and HM Revenue and Customs (HMRC), which initially will investigate the potential for any illegality relating to the data leaked from Panamanian Law firm Mossack Fonseca.

The Action Plan also details a series of tougher penalties to deter money laundering and the financing of terrorism.  Among other provisions in the plan, the government proposes to:

  • Consider new enhancements on disclosure of beneficial ownership structures
  • Increase the maximum jail sentences for financial crimes from two years to seven, classifying them as "serious crimes"
  • Introduce deferred prosecution agreements (DPA), serious crime prevention orders and financial penalties for breaches of sanctions prohibitions "to ensure that there is an effective and proportionate enforcement toolkit across all financial sanctions re-gimes in the UK".

Expanding international reach

UK Prime Minister David Cameron's 'Anti-Corruption Summit' in May 2016 will address the enforcement of international anti-corruption laws and the strengthening of international in-stitutions, and the timely publication of the new Action Plan re-enforces these aims.  The plan states that the UK will continue to work closely with international groups, including the G20 and the Financial Action Task Force (FATF), with the aim of achieving greater coopera-tion with important jurisdictions overseas.

The UK government has implemented several measures in recent years to combat the threat of money laundering from abroad.  These include implementing the power to refuse applica-tions with an unreasonably high level of risk, and requiring applicants from overseas inves-tors to have UK Financial Conduct Authority (FCA) regulated bank account, ensuring UK due diligence and anti-money laundering checks have been imposed.

In July 2015, the Prime Minister announced the UK will consider additional measures to re-quire beneficial ownership information of foreign companies investing in the UK, specifically focusing on the purchase of land or property, and public procurement contracts.  The discus-sion period has closed and responses are currently being analysed.

The government also agreed at the Joint Ministerial Council in December 2015 that Overseas Territory beneficial ownership information will be held central registers, similar to the new UK Persons of Significant Control (PSC) register, and will involve information exchange between law enforcement agencies.  The agreement, which was finalised on 11 April, means for the first time UK enforcement agencies will be able to see who owns and controls companies incorporated in the Overseas Territories and the Crown Dependencies.

Firms face higher costs for compliance

The government has set a deadline of October 2018 for all the reforms to be implemented, warning that businesses will have to devote significantly greater resources to anti-money laundering (AML) and tackling terrorist financing.

Launching the plan, the Treasury and the Home Office said that although the existing regime makes the UK "a hostile environment for illicit finance", the new plan will introduce an era of "aggressive new legal powers" which would "build new capabilities in law enforcement agencies to enable the relentless disruption of criminals and activities".

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