Legal Update

Money Laundering Regulations

Money laundering is the process by which criminals turn their 'dirty' income – which is usually earned in cash – into 'clean' money, by undertaking transactions which hide the original source of the cash and/or turn the cash into 'legitimate assets'.

The Government's battle against money laundering has caused a massive increase in the compliance burden for firms of all kinds engaged in financial transactions, following the passing of the Proceeds of Crime Act 2002. The main thrust of the regulatory regime is based on the need to 'know your client' (KYC), which is backed by the requirement to report any suspicious transactions. It is estimated that over 100,000 suspicious transactions will be reported to the authorities in the current year.

Money laundering now comes under the remit of the Serious Organised Crime Agency (SOCA).

Compliance with money laundering regulations can cause delays in the completion of quite innocent transactions when there is a need to get 'clearance' for the transaction in question. It is worth remembering that time may be necessary for this - especially when dealing with larger transactions with a foreign element. Do not be surprised, even as a client of long standing, if a bank or other financial institution asks to have sight of your passport before you are permitted to open a new account or undertake a transaction.

The regulation have been progressively tightened up since the Money Laundering Regulations 2007 were promulgated, the emphasis now being plaved on  management control and the need to carry out a proper form of risk assessment. In 2017, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force, which further raised the bar, especally for professional and finance organisations, to do 'customer due diligence'.

The Government issues failrly regular updates and guidance on money laundering regulation on its website.

More information on money laundering regulations can be found on the Office of Fair Trading website and guidance is available from HM Revenue and Customs' website.