Treasury confident new money laundering rules will scupper terrorist financing

 
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New regulations take effect today which the Treasury says will crack down on funding for terrorism and organised crime. Here's what you need to know about the changes.

1. It comes from an EU directive

Today is the final deadline for member states (which the UK still is until 2019) to implement the fourth EU anti money laundering directive into local law. It is hoped that the greater focus on risk assessment will make it more difficult for terrorists to move money through the UK financial system.

Stephen Barclay, economic secretary to the treasury, said: “Terrorist financing and money laundering are significant threat to our national security, and we are determined to make the UK a hostile environment for illicit finance."

2. Greater transparency on beneficial ownership

Corporations must now provide the government with up-to-date information on their ultimate beneficial owner. This is anyone who owns or controls 25 per cent of more of the company. Information about beneficial ownership is set to be compiled in a centralised register, accessible by banks and law firms.

3. The end of automatic CDD exemption

Firms will also have to apply for exemption from enhanced customer due diligence (CDD), a process which assesses whether customers will expose a company to risks including terrorist financing and money laundering. Previously exemption was automatic under certain circumstances, including cases dealing with UK pension schemes and public authorities.

4. Greater scrutiny of political figures

The implementation of the directive will also mean a uniform approach to politicians and others in political authority. Enhanced measures were only applicable to foreign politically-exposed persons (PEPs), but will now also affect British PEPs.

5. Customer due diligence in more situations

Thresholds for customer identification have also been lowered, meaning CDD must take place for anyone trading goods in cash with a value of more than €10,000 (£8,750), down from €15,000 (£13,120). Casinos will also have to perform CDD for customers wishing to place a bet or collect winnings of more than €2,000 (£1,750).

6. The industry is largely happy with the changes

Research conducted by the snappily-titled LexisNexis Risk Solutions found 73 per cent of financial crime professionals in the UK believe the new rules will make money laundering prevention easier for firms.

7. But some are worried about the technical challenge

Luca Primerano, head of strategy at anti-money laundering specialists Fortytwo Data, said that terrorist funding networks are too complex for companies and institutions to tackle alone.

"Effective anti-money laundering (AML) and combating the financing of terrorism (CFT) require not just tougher legislation but big data and machine learning-powered tools that can identify transactional patterns a human would never spot."

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