Anti-money laundering risk revolution planned by government

THE GOVERNMENT is proposing to scrap more than two-dozen criminal penalties underlying anti-money laundering procedures to encourage business to adopt a risk-based approach.

The aim is to focus compliance on the highest-risk areas, discourage the prevalent tick-box approach and reduce the regulatory burden.

A consultation on the proposal coincides with an EU Commission proposal to strengthen anti-corruption measures, including reinforcing accounting standards and statutory audits for EU companies.

The commission said it will decide on possible further measures related to: the role and supervision of auditors; governance and independence of audit firms; the creation of a single market for the provision of audit services; and the simplification of rules for SMEs.

A statement from Brussels complained that implementation of cross-border anti-corruption measures is patchy and urged member states that have not done so to ratify the Council of Europe’s Criminal Law Convention on Corruption in full.

It also called on member states to act on a framework decision intended to criminalise active and passive bribery across Europe, warning that it could consider replacing it with a directive and urging the private sector to develop and implement clear common standard rules for their respective fields on accounting, internal audit, codes of conduct and protection of whistleblowers.

The UK government’s anti-money laundering proposals follow a review of the regulations. Civil penalties supporting the requirement to identify and verify the identity of customers and carry out ongoing monitoring where appropriate will remain and there will be a consultation on whether or not regulators should have power to impose additional penalties.

The consultation will not affect criminal penalties for money laundering itself or the obligation to report suspicious activity to the Serious Organised Crime Agency. It closes on 30 August.

Commercial secretary Lord Sassoon said: “It is essential that the UK’s money laundering regulations make the UK a hostile environment for money laundering and terrorist finance. But improvements can be made and we must consider the impact of these regulations on British business.

“We believe that we can make the regulations more effective and proportionate by removing a range of criminal penalties on all businesses and by lifting the burdens on the smallest businesses. This will modestly reduce the burden on business, without damaging the fight against money laundering.”

Current regulations mean that responsible individuals within businesses could face prosecution if they fail to have adequate systems in place. Although they have rarely, if ever, been used, there is evidence that their existence deters firms from taking a risk-based approach for fear of getting it wrong and facing prosecution.

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