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Anti-money Laundering and Counter-terrorism Financing regime

Volume 651: debated on Monday 10 December 2018

The UK is one of the world’s largest and most open economies, and a leading global financial centre. That brings it with the heightened risk of illicit financial flows from money laundering and terrorist financing. The Government are committed to tackling the threat that this presents to our security and prosperity. The Government have taken robust action over recent years to clamp down on illicit finance, protecting our citizens and helping legitimate businesses to thrive.

The Financial Action Task Force (FATF) is the global standard setter for anti-money laundering and counter-terrorist financing (AML/CTF). The FATF published its mutual evaluation report of the United Kingdom on Friday 7 December. The report recognises that the UK’s AML/CTF regime is the strongest of the over 60 countries assessed by FATF and its regional bodies to date.

The UK received the highest rating possible in four out of the 11 areas of the report, and received a rating of “substantial” in a further four areas. In particular, the report highlights the UK’s efforts on:

Taking significant steps to understand and coordinate the UK’s response to the threat of illicit finance, including publishing two national risk assessments in 2015 and 2017;

Working with international partners to tackle illicit finance, through a strong legal framework and a liaison network spanning over 160 jurisdictions;

Aggressively investigating and prosecuting money laundering, with over 1,400 convictions a year, and adopting new tools such as unexplained wealth orders;

Using all available measures to disrupt terrorist financing, including criminal justice measures, confiscating funds, and financial sanctions;

Preventing the misuse of companies and trusts, and acting as a global leader by adopting a public register of company beneficial ownership and a register of trusts with tax consequences;

Promoting effective global use and implementation of financial sanctions against terrorists and against proliferation of weapons of mass destruction;

The Government recognise that there is more to be done and is progressing with a series of measures to redouble its fight against economic crime.

The National Economic Crime Centre (NECC), housed within the National Crime Agency, has recently been launched. Tasked with co-ordinating the national response to economic crime, the NECC will ensure operations achieve the greatest sustained impact on threats the UK faces, and will lead a new approach to economic crime in the UK.

In line with this, the UK will take forward its ambitious reform of the suspicious activity reporting regime. This will provide an improved IT system to help the UK’s Financial Intelligence Unit (UKFIU) process, analyse and distribute the nearly 500,000 SARs received annually by UKFIU, and will also drive up the quality and use of SARs across the UK’s system. The NCA is increasing the staffing of the UKFIU by more than 30% this year, with further increases envisaged in future years.

The Government plan to legislate in 2019 to introduce a register of beneficial ownership for overseas entities which own or purchase UK property, which is being developed by the Department for Business, Energy and Industrial Strategy (BEIS). The Government also plan to take further action to mitigate the risks presented by the misuse of limited partnerships, in line with the consultation response published today by BEIS. In addition, BEIS will look further at controls over who registers companies in the UK, what information they have to provide, and how assurance is provided over that information.

The 2017 National Risk Assessment noted the steps that UK supervisors are taking to strengthen their approaches and collaboration in the fight against illicit finance. Complementing this ongoing work, the Government launched the office for professional body AML supervision (OPBAS) earlier this year, which will continue its work with supervisors to help improve standards and consistency across the UK’s regime.

The FATF report underlines where more work can be done and will help to focus these efforts over the coming years. The Government are considering the recommendations in the report and will publish their response to these in due course.

A copy of the report has been deposited in the Libraries of both House.