WHAT ARE THE
Money laundering and terrorism financing laws in the United Kingdom?
In the United Kingdom money laundering and terrorism financing are serious offences and are governed by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and the Proceeds of Crime Act 2002 (POCA).
WHAT ARE THE
Key obligations that reporting entities have under UK laws?
The key obligations under the AML/CTF laws in the United Kingdom include:
- Customer Due Diligence (CDD) - covered entities, including banks, financial institutions, money remitters, lawyers, accountants, estate agents, and other relevant businesses, are required to establish and implement risk-based CDD measures. This includes verifying the identity of customers, obtaining beneficial ownership information, and assessing the risk associated with each customer.
- Enhanced Due Diligence (EDD) - in cases where there is a higher risk of money laundering or terrorism financing, such as when dealing with politically exposed persons (PEPs) or high-risk jurisdictions, covered entities are required to apply enhanced due diligence measures. This may include obtaining additional information and conducting ongoing monitoring of the business relationship.
- Reporting Suspicious Activity - covered entities must report any knowledge, suspicion, or reasonable grounds for knowledge or suspicion of money laundering or terrorism financing to the National Crime Agency (NCA). The reports should be made promptly when suspicion arises.
- Record-Keeping - covered entities must maintain records of transactions, customer identification information, and supporting documentation for at least five years from the date of the last transaction. These records should be readily available for examination by regulatory authorities.
- Compliance Programs - covered entities are expected to establish and maintain effective AML/CFT compliance programs. This includes implementing internal policies, procedures, and controls to detect, prevent, and report money laundering and terrorism financing activities. Staff training and regular independent audits are also important components of these programs.
WHO ARE THE
ML/TF regulators in the UK and what functions do they perform?
In the United Kingdom, there are different money laundering regulators who are responsible for oversight of different industry sectors. They key regulators are:
- Financial Conduct Authority (FCA) - the FCA is the main regulatory body responsible for overseeing and regulating financial services firms and markets in the UK. It regulates a wide range of financial institutions, including banks, building societies, credit unions, investment firms, insurance companies, and certain types of payment service providers.
- Her Majesty's Revenue and Customs (HMRC) - the HMRC is the UK's tax authority, and it also plays a role in combating money laundering. HMRC supervises certain sectors that are considered at risk for money laundering, including money service businesses, high-value dealers, and trust or company service providers.
- Gambling Commission - the Gambling Commission is responsible for regulating and overseeing the gambling industry in the UK. It ensures that gambling operators, including casinos, online gambling platforms, and betting shops, adhere to anti-money laundering requirements.
- Solicitors Regulation Authority (SRA) - the SRA is the regulatory body for solicitors and law firms in England and Wales. It sets standards and regulations for solicitors, including obligations related to preventing money laundering and terrorist financing.
- Institute of Chartered Accountants in England and Wales (ICAEW) - the ICAEW is a professional accountancy body that regulates and sets standards for chartered accountants in England and Wales. It provides guidance and regulations related to anti-money laundering measures for its members.
- Association of Chartered Certified Accountants (ACCA) - the ACCA is a global professional accountancy body that sets AML regulations and guidelines for its members operating in the UK.
There are other Government agencies that support prevention of money laundering and terrorism financing activities including:
- National Crime Agency (NCA) - the NCA is the UK's law enforcement agency responsible for leading the fight against serious and organised crime, including money laundering. It works closely with other regulators and law enforcement agencies to combat financial crimes.
- Crown Prosecution Service (CPS) - the CPS is the principal public prosecuting agency in England and Wales. It works in collaboration with other law enforcement agencies to investigate and prosecute money laundering offences..
- Financial Reporting Council (FRC) - the FRC is responsible for setting auditing and ethical standards in the UK, including regulations related to AML compliance for auditors.
The United Kingdom actively cooperates with international counterparts in combating money laundering and terrorism financing. This involves exchanging information, cooperating on investigations, and providing assistance to other jurisdictions when requested.
WHAT ARE THE
Industry sectors subject to ML/TF regulations?
In the United Kingdom the main industries that are regulated under the AML/CTF laws include:
WHAT ARE THE
Penalties for non-compliance with AML/CTF laws?
The MLR 2017 sets out the regulatory framework for anti-money laundering (AML) and counter-terrorism financing (CTF) obligations in the UK. Penalties for non-compliance with these obligations can include:
- Administrative Penalties - the regulatory authorities, such as the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA), have the power to impose administrative fines for breaches of AML/CTF requirements. These fines can vary depending on the nature and severity of the violation, but they can be substantial. The exact amount of the fine is determined on a case-by-case basis.
- Criminal Offences - individuals or entities convicted of money laundering or terrorism financing offences can face fines imposed by the courts. The fines can be unlimited and are proportionate to the seriousness of the offence.
- Imprisonment - convictions for money laundering or terrorism financing offences can result in imprisonment for individuals involved in such activities. The length of imprisonment can vary depending on the offence.
- Disqualification - individuals convicted of money laundering or terrorism financing offences may face disqualification from serving as a director of a company or from carrying out certain regulated activities.
- Regulatory Actions - regulatory authorities have the power to take regulatory actions against individuals or entities, such as revoking licence, imposing restrictions, or issuing public reprimands, for non-compliance with AML/CTF obligations.
WHAT ARE THE
Largest fines for non-compliance with AML/CTF laws?
UK regulators have show they are willing to take action for non-compliance with AML/CTF laws and have used their powers extensively, below is an example of some of the largest fines for non-compliance with anti-money laundering laws by regulatory agency:
Financial Conduct Authority (FCA)
The FCA provides details of the Enforcement actions that it has taken on its website, here are a few examples:
- ED&F Man Capital Markets Ltd - £17,219,300
- Al Rayan Bank PLC - £4,023,600
- Guaranty Trust Bank (UK) Limited (GT Bank) - £7,671,800
- TSB Bank Plc - £29,750,000
- Santander UK Plc - £107,793,300
- Gatehouse Bank plc - £1,584,100
- Ghana International Bank Plc - £5,829,900
- JLT Specialty Limited - £7,881,700
- Barclays Bank plc - £783,800
- HSBC Bank plc - £63,946,800
- National Westminster Bank Plc - £264,772,619
- Sunrise Brokers LLP - £642,400
- Credit Suisse - £147,190,200
- Sapien Capital Limited - £178,000
Major Earlier Fines
- Standard Chartered Bank was fined £102 million by the UK Financial Conduct Authority (FCA) for AML breaches. The fine was related to deficiencies in the bank's AML controls and failure to adequately assess the risk of its clients (2019).
- Deutsche Bank was fined £163 million by the FCA for AML failures. The fine was imposed for significant deficiencies in the bank's AML controls, particularly in its process for handling high-risk transactions (2017)
- Barclays Bank was fined £72 million by the FCA for AML control weaknesses. The fine was related to the bank's failure to adequately assess and monitor the risk posed by certain customers and transactions (2015)
- Standard Bank (now known as ICBC Standard Bank) was fined £7.6 million by the FCA for AML control failures. The fine was imposed for weaknesses in the bank's systems and controls related to high-risk customers (2014).
HMRC
The HMRC publicly names those businesses that are non-compliant with AML/CTF laws on their website.
Gambling Commission -The Gambling Commission provides details of the Enforcement actions that it has taken on its website, here are a few examples:
- Videoslots to pay £2m for regulatory failures (2023)
- William Hill Group businesses to pay record £19.2m for failures - WHG (International) Limited, which runs williamhill.com, will pay £12.5 million, Mr Green Limited, which runs mrgreen.com, will pay £3.7 million and William Hill Organization Limited, which operates 1,344 gambling premises across Britain, will pay £3 million (2023)
- Entain to pay £17 million for regulatory failures - (2022)
- £6.1m fine for online operator In Touch Games - (2022)
- Solicitors Regulation Authority (SRA)
Solicitors in the UK can be fined a proportion of their salaries.
Institute of Chartered Accountants in England and Wales (ICAEW) - Accountants in England and Wales that are subject to enforcement action are named on the ICAEW website.