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2017.06.29 - United Kingdom – new AML regulations adopted in conformity with the EU 4th Directive.

 

On 26 June 2017, new AML standard - The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 were adopted in the United Kingdom, in accordance with EU directive 2015/849 (so called “The Fourth Directive”).

As is known, the previous Money Laundering Regulations have been effective in the United Kingdom since 2007. The new edition of the AML rules are more extensive and corresponding to the current requirements; it consists of 110 sections within 114 pages (as compared to 51 section on 50 pages in the previous ML Regulations 2007).

Similar to the 4th Directive, the new Regulations impose stricter requirements on professional participants of the financial market (“Relevant persons”) such as banks, attorneys, auditors, accountants, as well as legal offices providing corporate services (“Trust and Company Services Providers”).

Particularly, the new Regulations describe in more details such responsibility of professionals to evaluate the risk level of their clients (Risk Assessment). In order to meet these criteria, the market participants are now regulated by both the AML legislation as well as additional regulations determined by a certain supervisory authority. Specifically, a UK supervisor authority for the Trust and Company Services Providers is Her Majesty Revenue and Customs.

When performing the risk assessment pursuant to Article 18 of the Regulations, the professional market participant shall take into account the risk factors like geographic location of a client, type of goods or services traded by the client, the nature of its financial transactions, the countries that supply the client’s goods, and other factors.

In addition, if the client is a company registered in the United Kingdom, Article 43 of the Regulations defines the obligation of the clients to provide all necessary information on beneficial owners of the client upon request of Trust and Company Services Provider.

Pursuant to Article 40, the obligation of the market participants is to keep the information about the client for at least 5 years after termination of cooperation with the respective client; and depending on the internal policies of each market participant, the information about the client may also be kept for additional 5 years.

In addition, the new ML Regulations focus more details on trusts. Particularly, pursuant to Article 45, information on beneficiaries of trusts falling within the scope of the Regulations is kept by Her Majesty Revenue and Customs – and moreover, not only about the current beneficiaries of the trust, but also about potential beneficiaries, i.e. persons who may become beneficiaries in the future.

The regulations impose the obligation to any participant of professional services market to elaborate its internal methodology of the client risk assessment, to arrange periodical training of personnel in matters of Anti Money Laundering, and other obligations.

Comments by INTERNATIONAL OVERSEAS SERVICES:

The ML Regulations 2017 adopted in Great Britain are more detailed when compared with the preceding regulations and impose relatively high Due Diligence and Know your Client requirements on corporate services providers located in Great Britain.

Unlike other EU states, Great Britain does not include in their ML Regulations the clauses stipulating the filing of the information on beneficial owners of companies into a centralised register - since UK has already included the respective demands in the Small Business, Enterprise and Employment Act 2015, in accordance to which the information on the owners of the most types of UK companies is already being submitted to the Companies Register as of 1 July 2016. The above said law is further amended on 26.06.2017 by the Information About People With Significant Control (Amendment) Regulations 2017.

Similarly for Scotland Limited Partnerships the submission of data on the controlling persons to Companies House is regulated by the Scottish Partnerships (Register of People with Significant Control) Regulations 2017, which were adopted in UK on 26 June 2017.

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