29th April 2003
Treasury issued a consultation document on 14th November 2002 on proposals under consideration by the Government to amend the Money Laundering Regulations 1993 and 2001, in order to:
The consultation period closed on 14th February with 68 written responses received, the main points from which are summarised later in this document. The majority of the responses were broadly supportive of the approach taken in the draft and a number of constructive suggestions to improve the Regulations have been made and will be incorporated in the final Regulations.
The Second EC Directive on Money Laundering requires that Member States implement this directive by 15th June 2003.
The UK has determined, as a result of the responses to the consultation, that further work is needed on a few aspects of the proposed Regulations and it will not be possible to implement them by 15th June 2003. The UK intends to lay the Regulations as soon as is reasonably possible, and hopefully by 15th June 2003, but will allow a period of three months from laying to the date when the Regulations come into force. This is in response to many submissions from industry for more time to implement training programs and anti-money laundering procedures. The delay in implementation is unfortunate but the Government has decided it is better to get the Regulations right than to risk imperfect implementation. However, we understand that a number of Member States will not meet the deadline and need more time to implement
Lawyers, external accountants, auditors and tax advisors: There was general support for the functional approach outlined as Option 2 in the condoc. The question was posed: whether the risks of money laundering and possibility of competitive distortion justified the inclusion of accountancy firms, which were not members of a professional association, within the regulated sector. All but one of the respondents who answered this question supported such an approach.
Option 3 was widely rejected as being too costly and not proportionate to the risks. Suggestions were made for a registration scheme, administered by an existing body. This will be reviewed in the longer term.
There were no responses from actual small businesses involved in the above activities; however, two bodies that represent small business supported Option 2.
Comments were received which indicated that the estimates for the cost of compliance were too low; the Final Regulatory Impact Assessment will revise the costings, as appropriate.
Estate Agents: The two industry bodies that responded agreed that a designated supervisory authority was unnecessary. Both associations will be writing guidance on compliance for members. Respondents from associated businesses agreed that the risks of money laundering through estate agents were sufficient to justify their inclusion within the scope of the Regulations.
Casinos: The casino associations and industry businesses responding supported Option 2 with every person gaining entry to the gaming facilities being identified on the door. There were strong objections to the proposed requirement for casinos to record all transactions of Euro 1,000 or more. They argued that this was not mandated under the Directive, but that a voluntary code of practice already required transactions of £2,500 or more to be recorded. Option 1 was dismissed as being impractical to carryout, putting many smaller casinos at a disadvantage in not being able to supervise such transactions as readily as larger enterprises.
Dealers in High Value Goods: The majority of respondents expressed the preference for businesses to be able to choose whether to accept cash transactions for Euro 15,000 or above. The other options of designating certain luxury goods or banning the use of cash over the limit were seen as impractical for the reasons stated in the consultation document. There were several objections to a registration fee being charged.
Deletion of old Reg 8, “Postal Concession”: A law enforcement agency supported deletion, but industry responses tended to object to the removal of the concession from the Regulations on the grounds that if the concession is put into guidance, as proposed in the consultation document, it could be removed at a later date without any Parliamentary approval.
Inclusion of originator information on money transfers: There were several responses concerning this matter although these new Regulations will not include a provision to include originator information. The FATF have since agreed an interpretative note on the recommendation. The Government will come forward with separate Regulations on this issue later in the year.
Training: It was pointed out by several respondents that as drafted, training would need to be given to all employees regardless of their exposure to money laundering risk; a suggestion was made that this be limited to relevant employees.
Definitions: Several respondents expressed a preference for definitions of accountancy services, auditing, legal services, and transactions to be included in the Regulations.
Record keeping: Many respondents objected to having to retain records of transactions for five years after termination of the business relationship. They argued that this went further than the requirements under the 1993 Regs.
Legal Professional Privilege: A number of accountancy bodies and firms requested the extension of LPP to accountants and tax advisors, stating that otherwise they could be at a competitive disadvantage when advising clients on the “Hansard Procedure“ to regularise a persons tax affairs.
Number of Reports to NCIS: Many respondents expressed concern at the lack of a de minimis limit in the Proceeds of Crime Act 2002 which might lead to a large number of reports to NCIS of very minor, though still potentially criminal, activities e.g. non-payment of parking fines.
Timing: As already mentioned above with regard to implementation, many respondents were very concerned that there would need to be sufficient time for businesses to prepare for the Regulations to come into force.
Restriction of exception Reg 5(1): Several respondents wished this exception to be widened from just the credit and financial institutions, allowed under the Directive, to all businesses in the regulated sector.
Directions of a constable: One respondent suggested that no business should be asked to continue a relationship on the direction of a constable, and that this power was unnecessary.
EEA/EC AML Equivalence: Several respondents requested a Treasury published list of equivalence with the Directive.
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