The UK’s HM Treasury Department released a draft change this week proposed to current money laundering regulations.
According to the draft document, “(Update) is intended to provide a robust, more risk-based proportional regime for financial crime.”
“The government is also committed to improving sector guidance on AML/CTF compliance on a variety of issues and publishing separate guidance on the use of digital identity verification for AML/CTF purposes.”
AML and CTF are shorthand for the financial industry for money laundering and counter-terrorism financing.
The release follows public consultations in 2024 and highlights the weaknesses of the UK system related to challenges of pooled client accounts, trust registration, cryptocurrency monitoring and customer due diligence.
This risk is significant, according to a national risk assessment in the Money Laundering and Terrorism Loan Report published in July. Due to the large and open economy, the UK has proven to remain very exposed.
Meanwhile, the Home Office’s Economic Crime Survey 2024 estimates that 2% (33,500) of British companies experienced known or suspicious money laundering in the previous year. The survey found that fraud is cyber-responsive and fraud linked to foreign actors accounts for more than 43% of all crimes in England and Wales.
In this landscape, crypto assets are becoming increasingly concerned. In 2024, the Financial Conduct Authority (FCA) found that 12% of UK-owned crypto assets were focused on the increasing role they play in laundry schemes, often through non-UK service providers.
The new draft regulations suggest several changes to crypto companies. The Financial Conduct Authority replaces current beneficial owner tests, ensuring that a wide range of “good and appropriate” tests are applied to corporate controllers, and that complex ownership structures are monitored.
Other regulations will reduce the Change-in-control notification threshold from 25% to 10%, in line with the Financial Services and Markets Act (FSMA) regime.
This means that the party (or material influence) who has acquired 10% or more shares must notify the FCA.
Additional fixes cover technical updates such as customer due diligence, trust registration, correspondent bank restrictions, and conversion of euro to sterling thresholds.
The Treasury is inviting draft feedback until September 30th before finalizing legislative consideration restrictions in early 2026.
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