Nucleus’ Emilia Michalak provides an update on some of the latest policies around financial crime law.

    We've known for a while about stricter anti-money laundering rules proposed in the draft of the Fourth Money Laundering Directive(4MLD). The directive should be formally adopted this year and all EU member countries will have two years to implement it at a national level.

    It isn't known yet how the 4MLD will be interpreted in the UK and what changes it's going to bring for regulated services.  However we can definitely expect some changes around simplified and enhanced customer due diligence as well as a more stringent approach towards identifying beneficial ownership of entities and inclusion of domestic Politically Exposed Persons in a PEP definition.

    The UK has been already preparing for these changes and this year,  we can also expect publication of:

    • HM Treasury National Risk Assessment of money laundering and terrorist financing.

      This will highlight any deficiencies around anti-money laundering, corruption and counter terrorist financing controls at a national level but will also most likely have some impact on AML regulations.

    • Small Business, Enterprise and Employment Bill.

      This will bring  implementation of a publicly accessible central register of company beneficial ownership information – the register of people with significant control or ‘PSC Register’.

    However, there are two things to consider with the register.

    1. Companies will need to take reasonable steps to identify people with significant control of the company and file this information annually, keep it up to date and available for public inspection.
    2. It will be a public register making due diligence of corporate customers easier. Full dates of birth and usual residential addresses won’t be publically available for data protection reasons but specified public authorities will have access to protected data on request.

    Also, to make corporate structures more transparent, bearer shares and corporate directors will be abolished under the Bill and reasonable time will be given to companies to comply with the new legislation. Companies need to be prepared to start filing their controlling parties information to Companies House from April 2016.

    Judging by the developments in legislation and regulations on European and national levels as well as higher penalties from the regulator for non-compliance, the next couple of years should  make regulation around financial services only stricter.

    We should expect updates to Joint Money Laundering Steering Group guidance as well as the FCA's Financial Crime: a guide for firms. Although these are for guidance and have some room for interpretation, financial service companies should be studying them with care and continuously improving their AML systems and controls. For example if your firm doesn’t have established procedures around a customer risk assessment, it’s a good time to start developing them. Know Your customer is becoming more and more important as this is the only way a firm can assess each customer’s risk and apply relevant due diligence and monitoring to mitigate it.

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