The Government has published a consultation on the implementation of the 4th EU Money Laundering Directive (the “4MLD”) into UK law, inviting views on its draft Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
The 3rd Money Laundering Directive (implemented into UK law by the Money Laundering Regulations 2007) is restricted to casino operators, but the 4MLD brings all gambling providers within its scope. However, the 4MLD gives Member States the option to exempt certain types of gambling services on the “basis of the proven low risk posed by the nature and, where appropriate, the scale of operations of such services”. The Government has decided to take advantage of this option and has indicated that it intends to exempt all gambling providers, other than casinos, from the requirements of the 4MLD, effectively maintaining the status quo.
The Government’s reasoning behind this welcome decision, rare good news for the industry, includes that it views the existing controls which apply to all gambling operators as sufficient with regard to the level of risk presented by these sectors. The Proceeds of Crime Act 2002 obliges all gambling operators to submit a Suspicious Activity Report to the National Crime Agency if they know or suspect a customer is engaged in money laundering. The Licence Conditions and Codes of Practice (“LCCP”) impose further obligations on all gambling operators, including the requirement to carry out a money laundering risk assessment and implement appropriate policies, procedures and controls to prevent money laundering.
The fact that the UK’s National Risk Assessment of money laundering and terrorist financing found gambling to be low risk compared to other regulated sectors was also an influencing factor. This study found that of all SARs submitted in 2014-15, the gambling sector as a whole was responsible for 0.37%, while the banking sector submitted 83.39% of the total SARs.
Not becoming subject to the revised Money Laundering Regulations later this year will reduce the anticipated administrative and procedural burden for betting, bingo and lottery operators. However these operators will be aware that money laundering remains a key area of focus for the Gambling Commission. The Commission has warned that if any sector of the gambling industry ceases to be regarded as low risk the Government can act to include it within the scope of the Regulations. The draft Regulations provide for the Government to conduct a risk assessment by June 2018 to determine, in particular, whether providers of gambling services other than casinos should continue to be excluded from the requirements.
Operators of remote and non-remote casinos who will be subject to the revised Regulations will need to assess what changes will need to be made to their policies and procedures, in particular with regard to customer due diligence. Helpfully, the new Regulations will include a summary of the risk factors to be considered when determining what level of due diligence to apply. It should be noted that PEPs will now include individuals from the UK, but the Government proposes that risks associated with PEPs should be assessed on a case-by-case basis and the extent of enhanced measures tailored accordingly.
It is anticipated that the new Regulations will come into force by 26 June 2017.