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Consultation on Enhancing AML Regulations
In March, HM Treasury unveiled a consultation to bolster the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs). This move is part of a broader initiative detailed in the Economic Crime Plan (2023-26), dedicated to mitigating money laundering risks. The consultation, which concludes on June 9th, revisits issues flagged in previous assessments, such as the 2022 review which proposed several technical amendments to enhance the regulations’ effectiveness and proportionality for businesses and consumers.
Treasury Minister Baroness Vere, as cited by Legal Futures, stated, “We aim to strike a more effective balance between regulatory demands on firms and customers and the risks of money laundering and terrorist financing.”
The consultation seeks feedback on whether Regulation 27 clearly outlines the conditions for customer due diligence (CDD) trigger points to clarify firms’ responsibilities. It also explores the potential for tailored guidance on digital identity verification through the UK Digital Identity and Attributes Trust Framework (DIATF).
Regarding enhanced due diligence, firms were consulted on their use of specific risk factors in regulation 33(6), such as involvement in transactions with cultural or religious significance, to detect suspicious activities. Although these factors do not necessitate mandatory enhanced due diligence, their associated risks must be considered.
The consultation also addresses the regulatory requirements for custodial wallet providers in the cryptocurrency sector, highlighting unique risk factors.
Additionally, following a warning notice about widespread AML noncompliance issued by the Solicitors Regulation Authority in October 2023, there has been a proposal for it to become the sole AML supervisor for legal services, with the government set to decide on this shortly.
Credas CEO on Streamlining AML Compliance
Tim Barnett, CEO of identity and AML verification firm Credas, discussed the challenges and innovations in AML compliance during his appearance on the Today’s Conveyancer Podcast. He emphasized the crucial role of conveyancers and the broader property profession in ensuring legitimate transactions.
Barnett highlighted how Credas helps reduce the administrative load through advanced document verification, which involves scrutinizing multiple aspects of a document to confirm identity authentically. “Our IDV process isn’t just a single check but comprises dozens of mini-checks that together verify someone’s identity,” Barnett explained. This process is enhanced by leveraging various data sources, including credit reporting agencies and databases of deceased individuals, to ensure a higher level of certainty than traditional methods like bank statements.
Barnett cautioned that many firms might not be as compliant with AML regulations as they believe, especially those that use outdated methods like emailing ID documents or manually entering passport numbers. He also noted the challenges posed by generative AI in creating fake documents and the ongoing “AI battle” between fraudsters and verification technologies.
As a certified IDSP under the DIATF, Credas is at the forefront of setting standards for digital identity verification, ensuring robust regulatory compliance without centralized government control over digital identities.
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