On 11 March 2024, HM Treasury launched a consultation on Improving the effectiveness of the Money Laundering Regulations (the “MLRs Consultation”).

Background

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “MLRs”) place requirements on a range of businesses in the regulated sector (which includes casinos) to identify and prevent money laundering and terrorist financing.

In the MLRs Consultation, HM Treasury seeks views on proposed changes to improve the effectiveness of the MLRs as part of the Government’s wider programme of work set out in its Economic Crime Plan 2023-2026.

In the foreword to the MLRs Consultation, Baroness Vere, the Treasury Lords Minister, makes clear that “a key principle in the MLRs is proportionality” and that the Government is seeking to address areas of the MLRs where there is room to find a better balance between what is required of regulated firms (i.e. relevant persons within scope the MLRs, including casinos) and customers, and the risk of money laundering and terrorist financing.

Consultation Themes

The MLRs Consultation focuses on four core themes which we summarise below.

1. Making customer due diligence more proportionate and effective

Chapter 1 considers customer due diligence requirements, including enhanced and simplified checks, and explores key stakeholder concerns about the proportionality of the due diligence requirements. It further considers the various options to use the MLRs to achieve a “better balance” and support efforts to prioritise resource where it will have the greatest impact. The topics covered include:

• whether the triggers for due diligence are sufficiently appropriate and clear, particularly for regulated firms that are not in the financial sector, such as casinos;
• whether clarity can be provided to regulated firms on when to carry out ‘source of funds’ checks;
• how best to support the use of digital identity when verifying customer identity;
• when enhanced due diligence checks (“EDD”) should be required; and
• if changes could be made to improve the proportionality and effectiveness of EDD in relation to High Risk Third Countries.

2. Strengthening system coordination

Chapter 2 considers a number of issues intended to strengthen the system coordination across the UK’s anti-money laundering and counter-terrorism funding (“AML/CTF”) regime. The changes proposed reflect in part the need to update the MLRs, to ensure effective cooperation as the system evolves to take account of new and emerging threats, technological change and changes to the legislative landscape. The topics covered are:

• ways to ensure that key information sharing and collaboration gateways are open and useful;
• whether Companies House should be added to the list of bodies with whom AML supervisors must cooperate; and
• how regulated firms should use the National Risk Assessment of Money Laundering and Terrorist Financing to help target their compliance work.

3. Providing clarity on scope of the MLRs

Chapter 3 considers issues at the boundary of the AML/CTF regulation regime, and recognises that the regime, and the guidance that supports firms and supervisors to comply with it, needs to be kept updated to keep pace with wider regulatory and market changes following the UK’s exit from the EU. The topics covered are:

• how the thresholds in the MLRs which are currently in Euros could be changed to Pound Sterling;
• potential gaps in the regulation of trust company and service providers; and
• how best to align registration and change in control measures for custodial wallet providers and cryptoasset exchange providers between the Financial Services and Markets Act 2000 and the MLRs.

4. Reforming registration requirements for the Trust Registration Service

Finally, Chapter 4 proposes a number of changes to the registration requirements for the Trust Registration Service, which are intended to increase transparency in relation to certain higher risk trusts, whilst reducing the administrative burdens on low-risk trusts.

Relevance to other open consultations

A. Reforms to the AML/CTF supervisory regime

The MLRs Consultation has been launched whilst the Government considers the responses to its June 2023 consultation on reforms to the AML/CTF supervision regime that was launched last year (see our previous article) (the “Supervisory Consultation”).

At the time of writing, no response to the Supervisory Consultation has been published. However, Baroness Vere confirms in the MLRs Consultation that the Government expects to determine the new model for the UK’s AML/CTF supervisory regime “in the coming months”. It is Baroness Vere’s intention that any amendments to the provisions in the MLRs pursuant to the MLRs Consultation will be supported by an improved supervision regime “further strengthening the UK’s overall regime for reducing economic crime”.

B. Cost of compliance survey

In parallel with the MLRs Consultation, HM Treasury is running a survey (the “Cost of Compliance Survey”) on the cost of compliance with the MLRs, in order:

1. to better understand how regulated businesses comply with the MLRs; and
2. to assess the impact of future changes to the MLRs.

You can view and respond to the Cost of Compliance Survey here.

Next steps

On 12 April 2024, HM Treasury announced it would be hosting a series of virtual, open roundtables to discuss the MLRs Consultation with interested stakeholders, including regulated businesses and their customers, supervisory bodies, law enforcement agencies, civil society organisations and members of the public. The first session for relevant persons regulated by HMRC and the Gambling Commission (i.e. casino licensees) was held on 18 April 2024. However, an additional session for all sectors and stakeholders will be held at 11am on Tuesday 7 May. Details for this session, including how to register, can be found here, and we encourage all casino operating licence holders (and other interested parties, including stakeholders) to participate in these roundtables.

We also recommend that casino operating licence holders (and other interested parties, including stakeholders) review and respond to the MLRs Consultation and the Cost of Compliance Survey.

Both the MLRs Consultation and the Cost of Compliance Survey are open until 11:59pm on 9 June 2024.

Please get in touch with us if you would like assistance preparing a response to the MLRs Consultation, or legal advice on any AML/CTF compliance matters relevant to gambling licensees in Great Britain.