Money Laundering Legislation

Combating money laundering continues to be a key issue for many businesses. Tackling the complex international patchwork of regulatory and legal requirements, while continuing to serve clients locally, is challenging.

UK & European Framework for Anti-Money Laundering Legislation

A summary of legislation and regulations established in the United Kingdom and across the European Union that establish a framework for Anti-Money Laundering controls. Reference – The Law Society practice notes on Anti-money laundering.

Financial Action Task Force (FATF)

This was created in 1989 by the G7 Paris summit, building on UN treaties on trafficking of illicit substances in 1988 and confiscating the proceeds of crime in 1990. In 1990, FATF released their 40 recommendations for fighting money laundering. Between October 2001 and October 2004 it released nine further special recommendations to prevent terrorist funding.

European Union directives

1991 – first money laundering directive

The European Commission issued this to comply with the FATF recommendations. It applied to financial institutions, and required member states to make money laundering a criminal offence. It was incorporated into UK law via the Criminal Justice Act 1991, the Drug Trafficking Act 1994 and the Money Laundering Regulations 1993.

2001 – second money laundering directive

This incorporated the amendments to the FATF recommendations. It extended anti-money laundering obligations to a defined set of activities provided by a number of service professionals, such as independent legal professionals, accountants, auditors, tax advisers and real estate agents. It was incorporated into UK law via the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2003.

2005 – third money laundering directive

This extended due diligence measures to beneficial owners, recognising that such measures can be applied on a risk-based approach, and required enhanced due diligence to be undertaken in certain circumstances. It is incorporated into UK law by the Money Laundering Regulations 2007 and the Terrorism Act 2000 (Amendment) Regulations 2007 (TACT regulations 2007) and Proceeds of Crime Act 2002 (Amendment) Regulations 2007 (POCA regulations 2007) (the TACT Regulations 2007 and the POCA Regulations 2007).

Proceeds of Crime Act 2002 (POCA)

Scope

POCA, as amended, establishes a number of money laundering offences including:

  • principal money laundering offences
  • offences of failing to report suspected money laundering
  • offences of tipping off about a money laundering disclosure, tipping off about a money laundering investigation and prejudicing money laundering investigations

The TACT Regulations 2007 and the POCA Regulations 2007 repealed the s333 POCA tipping off offence. It has been replaced by section 333A which creates two new offences. S342(1) has also been amended to reflect these new offences.

Application

POCA applies to all persons, although certain failure to report offences and the tipping off offences only apply to persons who are engaged in activities in the regulated sector.

The Proceeds of Crime Act 2002 (Business in the Regulated Sector and Supervisory Authorities) Order 2007 amended the Proceeds of Crime Act 2002, changing the definition of the regulated sector to bring it into line with the Money Laundering Regulations 2007.

Under Schedule 9 of POCA, key activities which may be relevant to you are the provision by way of business, in one of the following ways:

  • advice about the tax affairs of another person by a firm or sole practitioner
  • legal or notarial services by a firm or sole practitioner involving the participation in financial or real property transactions concerning
    • the buying and selling of real property or business entities
    • the managing of client money, securities or other assets
    • the opening or management of bank, savings or securities accounts
    • the organisation of contributions necessary for the creation, operation or management of companies
    • the creation, operation or management of trusts, companies or similar structures

Terrorism Act 2000

Scope

The Terrorism Act 2000, as amended, establishes several offences about engaging in or facilitating terrorism, as well as raising or possessing funds for terrorist purposes. It establishes a list of proscribed organisations the Secretary of State believes are involved in terrorism. The TACT and POCA Regulations 2007 entered into force on 26 December 2007 and introduced tipping off offences and defences to the principal terrorist property offences into the Terrorism Act 2000.

Application

The Terrorism Act applies to all persons. There is also a failure to disclose offence and tipping off offences for those operating within the regulated sector.

The Terrorism Act 2000 (Business in the Regulated Sector and Supervisory Authorities) Order 2007amended the Terrorism Act, changing the definition of the regulated sector to bring it into line with the Money Laundering Regulations 2007.

The Money Laundering Regulations 2007

Scope

The Money Laundering Regulations 2007 repeal and replace the Money Laundering Regulations 2003 and implement the third directive. They set administrative requirements for the anti-money laundering regime within the regulated sector and outline the scope of customer due diligence.

A review of the The Money Laundering Regulations 2007 by The Treasury began in 2009. The review focused on whether the regulations were effective and proportionate in practice, identifying where they are working well and where there may be room for improvement. That review of the Money Laundering Regulations and consultation process resulted in the Money Laundering (Amendment) Regulations 2012, which will come into force on 1st October 2012.

The regulations aim to limit the use of professional services for money laundering by requiring professionals to know their clients and monitor the use of their services by clients.

Application

Regulation 3 states that the regulations apply to persons acting in the course of businesses carried on in the UK in the following areas:

  • credit institutions
  • financial institutions
  • auditors, insolvency practitioners, external accountants and tax advisers
  • independent legal professionals
  • trust or company service providers
  • estate agents
  • high value dealers
  • casinos

 



Contact Valetime Group

Now that we have introduced you to our services, find out how we can help you or your business.

contact form | @valetimegroup | phone: +44 1204 497 900.