Sanctions have dominated the headlines since the Russian invasion of Ukraine on 23 February, as the UK in common with the USA, the EU and others have responded with a range of sanctions designed to squeeze Russia’s financial institutions, freeze the assets of the wealthy elite, stop trade in strategic sectors such as defence and travel, which put maximum economic pressure on Putin’s regime.
The impact of this has resulted in numerous compliance challenges not only for the financial services industry but across all businesses with exposure to the region.
Undoubtedly, this will only be the beginning of the challenge for AML compliance as the consequences tragically ensue with human trafficking following the refugee crisis.
In addition, there are number of other activities that are designed to strengthen the transparency of the UK’s anti-money laundering and terrorist financing control framework, all of which impact compliance teams.
The war in Ukraine saw the UK government bring forward the Economic Crime Bill, which was passed through Parliament with Royal assent on 15th March. The Act seeks through the new legislation to bolster the UK’s fight against dirty money in several key areas:
- Introduction of a new Register of the beneficial owners of overseas entities that own property or land in the UK. Aimed at increasing transparency of ownership of assets, including businesses, property and land typically held in an opaque corporate structure, trust or company.
- Strengthening the Unexplained Wealth Order, which is a tool used by law enforcement to place the onus on a suspected individual to prove legitimate ownership of assets in question.
- Further strengthening of the process for designating individuals and entities as the target of sanctions and strengthening the enforcement of sanctions-related offences.
Closely related to this new legislation are:
- Companies House Reform in the form of a bill that gives Companies House new powers in key areas. For example, identity verification will be required on individuals setting up, running, owning or controlling a company in the UK. There are other measures in the Bill that are designed to improve the governance of the information held in the register.
- Economic Crime Levy. Already in place, the purpose is to fund Government action designed to tackle money laundering and help deliver the reforms committed to in the 2019 Economic Crime Plan. At a rate determined by turnover, financial institutions will pay a levy for the year 1 April 2022 to 31 March 2023, with the first payment made in the year 2023/24.
- AML Regulatory Framework Consultation and a review. Not one but two reviews were announced by the Government last autumn with the intention to strengthen and review the UK’s AML regulations. Running in parallel, the first is a consultation proposing a number of changes to improve the existing framework. The second is a consultation that seeks views around a number of more far-reaching proposals that would shift the current rules-based AML approach to a risked based approach that is more focused on effectiveness of controls.
Cryptoasset Registration deadline looms
Now that Cryptoasset firms have to comply with AML regulations, firms must register with the FCA in preparation for compliance and supervision by the FCA. The deadline was extended last year from 9 July 2021 to 31 March 2022 for existing firms.
Recently published reports:
- ‘SARs in Action’ published by the National Crime Agency-February 2022
- Sanctions Regulations Report on Annual Reviews 2021 published by the FCDO in January 2022