Money laundering poses a significant threat to the integrity of the global financial system, undermining trust and facilitating criminal activities. In response, governments around the world have implemented stringent Anti-Money Laundering (AML) regulations to combat this illicit practice. This article focuses on AML regulations specifically in the United Kingdom, exploring their purpose, key components, and the obligations they impose on businesses operating within the country.


What Are Anti-Money Laundering Regulations? 


Anti Money Laundering (AML) entails laws, policies, as well as regulations that prevent financial crimes and illegal activity. Global and local regulators worldwide stringently help prevent financial crimes; they also build policies that help to mitigate financial crimes, especially money laundering. To better learn more about anti-money laundering, read this article.


Current Major Components of Anti-Money Laundering Measures In The United Kingdom


1. Legislated Laws In The UK


The primary or main legislation that governs anti-money laundering and compliance are the; Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; included in these regulations is the EU's Fourth Money Laundering Directive (4MLD) and the Funds Transfer Regulation (FTR). These laws direct the obligations of businesses to prevent money laundering and terrorist financing.


2. Authorities That Enforce Anti-money Laundering Regulations


The main regulatory bodies that are responsible for enforcing AML and compliance regulations in the UK include the following:


  • Financial Conduct Authority(FCA)
  • Gambling Commission
  • Information Commissioner's Office


Each of the regulatory bodies listed above has definite oversight over different sectors, such as banks, casinos and data protection.


3. Customer Due Diligence (CDD)


UK firms are required to conduct thorough customer due diligence measures in order to verify the identity of their customers and understand their business activities. This entails performing identity checks, assessing the risk associated with customers and monitoring transactions for suspicious activities.


4. Legal Obligation To Report Suspicious Activity


Firms in the United Kingdom are legally obligated to report any suspicious activities that may have an allusion to money laundering or terrorist financing to the National Crime Agency. This allows for a collaborative approach between businesses and law enforcement to easily detect and mitigate financial crimes.


5. Compliance Programs:


Commercial entities in Uk, are obligated to establish robust AML and compliance programs that are tailored to their unique industry and risk profile. These programs include internal controls, adequate staff training as well as risk assessment and frequent independent audits to ensure adherence to AML regulations.


6. Penalties and Enforcement


Non-compliance with anti-money laundering regulations can result in severe penalties, which include fines and criminal prosecution. Regulatory authorities that enforce compliance have the power to investigate businesses that fail to comply and take appropriate enforcement action.


Ways To Get Compliant With Anti-money Laundering Requirements In The UK


1. Reporting


Although this can be regarded as a basic measure, it can be effective, especially when done promptly. Business entities are obligated or mandated by the Proceeds of Crime Act 2002 to report any kind of suspicious activity that they detect. A Suspicious Activity Report (SAR must be handed over to the National Crime Agency (NCA) by a nominated officer deemed appropriate as soon as the suspicion arises. It can also be done online on the go by accessing this online portal.


2. Refining Organisation Structure To Support Compliance


Companies can ensure that organisational structures should be well utilised to combat financial crimes like money laundering. Structures may differ and be innovative. Companies can create a separate Anti-money laundering department or an audit department that is well brief on anti-money laundering regulations and can also detect irregularities in financial transactions. 


No matter the structure adopted, duties and roles should be clear and well-strategised to actually mitigate risks. Companies are required to appoint a nominated officer. Also, FCA-regulated businesses must select a Money Laundering Officer (MLRO). Both officers are expected to perform distinct but important duties. The MLRO is an employee appointed to oversee a company's compliance with AML regulations and to alert the company when they detect a suspicious activity that could be related to money laundering, while the nominated officer is nominated to receive and consider suspicious activity reports (SARs), they are also obligated to make external suspicious activity to the FCA.


Asides from relying on official departments and officials with distinct duties related to AML regulations, companies are also required to monitor their employed staff and provide adequate AML training; employees who are exposed to a higher risk of money laundering should be subject to more stringent vetting processes.


3. Customer Due Diligence Checks


Customer due diligence, with the popular CDD, refers to a process necessarily adopted by financial institutions and businesses in order to gather data or information about their clients or customers so that they can identify and mitigate risks related to illicit activities like; identity fraud, money laundering, etcetera. Customer Due Diligence in the UK includes record keeping, enhanced due diligence, continuous monitoring, identity verification, risk assessment, etcetera.


4. Anti-Money Laundering Screening


Effective and up-to-date systems should be set up in order to complete regular AML screening; the systems should be appropriate to the nature, size and risk level of the companies. Legal and natural individuals should be checked against multiple watchlists like the UK government's financial sanctions list, trade sanctions list, European Commission's list of high-risk third countries and the Treasury’s list of high-risk countries as well as countries to which enhanced due diligence is required.


5. Ardent Record Keeping


UK businesses are required to keep records of all CDD measures implemented, including copies of identification documents, transaction records, risk assessments, and any other pertinent documentation. These records should be retained for a specific amount of time (typically five years) and made available to regulatory authorities upon request. 


What Businesses do AML regulations apply to In The UK? 


Here is a summary of the businesses that are mandated to oblige AML regulations:


1. Money Service Businesses


MSBs, such as money transmitters, providers of currency exchange, and payment processors, are governed by AML laws. They have to submit an application to the Financial Conduct Authority (FCA) and abide by the MLR 2017 specifications.


2. Banks and Financial Institutions


Both conventional banks and Internet payment service providers are subject to extensive AML requirements, as are banks, credit unions, building societies, and other financial institutions operating in the UK.


3. Casinos and other Gambling Facilities


The UK Gambling Commission controls and monitors the adherence to AML requirements by casinos, betting shops, online gambling platforms, and other gambling facilities. For client due diligence, the reporting of suspicious transactions, and continuous monitoring, there are certain standards.


4. Providers of Trust and Company Services


AML requirements apply to those who offer trust and company services, such as formation agents, trust administrators, and corporate service providers. They need to register with the FCA or HM Revenue and Customs (HMRC) and follow the MLR 2017 guidelines.


5. Estate Agents


AML requirements apply to real estate agents and developers. When dealing in high-value transactions, such as the sale or purchase of real estate, they have a responsibility to exercise customer due diligence.


6. Accountants and Tax Advisers


AML requirements apply to those who work in the accounting and tax advisory fields. When offering services pertaining to tax planning, financial advising, or auditing activities, they must adhere to AML obligations.


7. Lawyers and Legal Professionals


AML requirements also apply to barristers, solicitors, and other legal professionals. Due diligence must be done, suspect transactions must be reported, and client confidentiality must be upheld.


8. Dealers in high-value products


Such as those that deal in precious metals, fine art, or other high-value items, are subject to AML legislation. They have a responsibility to investigate consumers thoroughly and report any questionable transactions.


AML Sanctions In The United Kingdom


AML sanctions in the UK play an important role in combating and mitigating money laundering, terrorist financing, and other illegal financial activities. These sanctions are imposed by the government and regulatory authorities to restrict the transfer of funds, freeze assets, and deter individuals or entities engaged in illicit activities. The following AML sanctions are applicable in the UK.


1. United Nations Sanctions


The UK is committed to implementing and enforcing United Nations (UN) sanctions. These sanctions are imposed by the UN Security Council and are binding on all member states. They aim to address threats to international peace and security, including terrorism, weapons proliferation, and human rights violations.


2. European Union Sanctions


Prior to the UK's withdrawal from the European Union, it implemented and enforced EU sanctions. These sanctions targeted individuals, entities, and countries involved in activities such as terrorism, arms proliferation, and human rights abuses. After Brexit, the UK has adopted its own autonomous sanctions framework.


3. UK Autonomous Sanctions


The UK now has the power to impose its own autonomous sanctions independent of the EU framework. This allows the UK to design targeted measures against individuals, entities, or countries involved in activities that pose a threat to national security or international stability.


4. Office of Financial Sanctions Implementation (OFSI)


The OFSI, which operates under the UK Treasury, is responsible for implementing and enforcing financial sanctions in the UK. They maintain and update the Consolidated List of individuals, entities, and countries subject to financial sanctions. It is the responsibility of businesses and individuals to check this list and comply with any sanctions in place.


5. Sanctions List Checking


UK businesses are required to conduct sanctions list checks as part of their customer due diligence processes. This involves screening customers, clients, and other transaction counterparts against the relevant sanctions lists to ensure they are not involved in sanctioned activities.


6. Penalties and Enforcement


Non-compliance with AML sanctions can result in significant penalties, including fines and criminal prosecution. The OFSI has the authority to investigate and take enforcement action against businesses and individuals that breach sanctions regulations.


Achieving AML Regulations with Youverify


It is important to implement anti-money laundering measures across all kinds of businesses. However, financial entities or institutions will always be held to the highest scrutiny. This is why financial institutions need to have departments dedicated to track and fraud and money laundering; all employees should also be educated on the best AML practices.

For small, medium and large-scale businesses, it is important that reliable KYC and AML automation tools are leveraged to avoid sanctions and avoidable losses. 


See how 100+ leading companies use Youverify for KYC and AML screening of customers for compliance and real-time risk detection. Request a demo today.