Wednesday 15 March 2017
Money Laundering, Terrorist Financing and Transfer of Funds Regulations
The Government have today published draft Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“Money Laundering Regulations 2017”). These regulations transpose the EU fourth money laundering directive (and the Fund Transfer Regulation (FTR) which accompanies it), which seek to implement the international standards set by the Financial Action Task Force.
The Government previously consulted on the transposition of the fourth money laundering directive (4MLD) and the Funds Transfer Regulation in autumn 2016 and these regulations are accompanied by the Government response to that consultation.
The overall objective of transposition is to ensure that the UK’s anti-money laundering and counter-terrorist financing (AML/CTF) regime is kept up to date is effective and is proportionate. This will enable the UK to have a comprehensive AML/CTF regime and ensure that the UK’s financial system is an increasingly hostile environment for money laundering/terrorist financing (ML/TF).
The Money Laundering Regulations 2017 introduce a number of new and updated requirements on relevant businesses and changes to some of the obligations found under the third money laundering directive (3MLD). The FTR updates the rules regarding information on payers and payees accompanying transfers of funds, in any currency, for the purposes of preventing, detecting and investigating ML/TF, where at least one of the payment service providers involved in the transfer of funds is established in the EU.
The Money Laundering Regulations 2017 have been informed by the responses submitted to the autumn 2016 consultation, and the call for evidence on the anti-money laundering supervisory regime in 2016. Changes introduced by the Money Laundering Regulations 2017 include:
Her Majesty’s Revenue and Customs (HMRC) acting as a registering authority for all trust and company service providers (TCSPs), who are not registered by the Financial Conduct Authority (FCA);
an extension of the fit and proper test to agents of money service businesses (MSBs), which will be carried out by HMRC;
the exemption of all gambling service providers from the requirements of the directive, except remote and non-remote casinos. The national risk assessment found that, while ML/TF risks exist in the gambling sector, it is relatively lower risk than other regulated sectors, partly because risks are mitigated by licensing conditions and robust supervision. The Government will regularly review their position on the ML/TF risk that gambling providers present;
a decision not to allow pooled client accounts to be automatically subject to simplified due diligence, but instead for this to be applied on a risk-based approach;
clarification and enhancement of the obligations on money laundering supervisors.
So as to address concern about the disproportionate application of enhanced due diligence measures (EDD) to politically exposed persons, their family members and known close associates, the Government are also requiring firms to take a proportionate approach to EDD. The Money Laundering Regulations 2017 make it clear that firms must assess the level of risk associated with a particular person and assess the extent of the EDD to be applied to that person. In the Government’s view it is not acceptable for firms to refuse to establish a business relationship or carry out a transaction based solely on anyone’s status as a PEP and this was never the intention of 4MLD. Firms must form their own view of the risks associated with individual PEPs, their family members, and known close associates on a case-by-case basis, but the Government would expect that PEPs entrusted with prominent public functions by the UK should generally be treated as lower-risk, and that firms should apply EDD accordingly.
This approach will complement the important provisions put forward by my hon. Friend the Member for Broxbourne (Mr Walker) and accepted by the Government in the Bank of England and Financial Services Act 2016. The FCA will also shortly publish draft guidance on how firms should apply EDD to PEPs, their family members and known close associates.
Alongside the draft Money Laundering Regulations 2017, the Government have also published a response to the consultation on the anti-money laundering supervisory regime. Inconsistent supervision was highlighted by the UK’s national risk assessment as a weakness. The Money Laundering Regulations 2017 impose clearer obligations on supervisors and this publication announces a new office for professional body AML supervision to work with professional body supervisors to help, and ensure, compliance with the new Money Laundering Regulations 2017. Views on the powers this new office should have to carry out this task effectively are requested by 26 April.
The draft Money Laundering Regulations 2017 are open to consultation until 12 April. We expect the regulations to come into force on 26 June.
Both documents can be found at:
Communities and Local Government
At autumn statement 2015 the Government announced that the Department for Work and Pensions (DWP) temporary accommodation management fee would be replaced by increased funding to local authorities to give them more control and flexibility to tackle homelessness.
I am pleased to inform you that we have today announced the allocations for the Department for Communities and Local Government’s new flexible homelessness support grant which will replace the DWP fee from April this year. The total funding over two years is £402 million. Attachments with details of allocations and methodology can be found online.
We have published the funding allocations for the grant over two years so councils will know with more certainty how much they will receive under the new system. We will announce allocations for 2019-20 during 2017-18. The funding has been allocated according to a formula which reflects relative homeless pressures, while at the same time aiming to protect local authorities which currently have high levels of temporary accommodation.
No authority will receive an annual allocation less than we estimate they would have received under the DWP fee—assuming rising levels of demand.
The new grant gives councils more control and flexibility over homelessness budgets. It forms part of the Government’s end-to-end approach to tackling homelessness, helping both those at risk of homelessness and those experiencing a crisis. It sits alongside other funding for homelessness, including the £315 million homelessness prevention funding, our recently announced £50 million homelessness prevention package and the £61 million new burdens funding for the Homelessness Reduction Bill introduced by my hon. Friend the Member for Harrow East (Bob Blackman), which will significantly reform England’s homelessness legislation and ensure that more people get the help they need to prevent them becoming homeless.
In order to manage the transition to a new funding regime carefully, we are ring-fencing the grant for two years to ensure it is spent on homelessness services.
In recognition of the particular challenges faced by London boroughs, we have set aside £25 million of the funding over the next two years. Before making final decisions on the allocation of this funding we will work with the Greater London Authority and London boroughs to consider ways of helping councils to collaborate in the procurement of accommodation for homeless households.
In designing the grant, we worked with local housing authorities across the country, including all London boroughs.
The attachments can be viewed online at:
Baseline Profit Rate 2017-18
I am today announcing that I have set the baseline profit rate for single source defence contracts at 7.46%, in line with the rate recommended by the Single Source Regulations Office (SSRO). I have also accepted the methodology used by the SSRO to calculate this figure.
I am also announcing new capital servicing rates and an SSRO funding adjustment as recommended by the SSRO, which can be found in table 1 below. These rates have also been published in the London Gazette, as required by the Defence Reform Act 2014, and will come into effect from 1 April 2017.
Element 2016 rates 2017 rates Baseline profit rate (BPR) (% on contract cost) 8.95% 7.46% Fixed capital servicing rate (% on fixed capital employed) 5.08% 4.84% Working capital servicing rate (% on positive working capital employed) 1.40% 1.37% Working capital servicing rate (% on negative working capital employed) 0.73% 0.59% SSRO funding adjustment n/a -0.025%
Baseline profit rate (BPR) (% on contract cost)
Fixed capital servicing rate (% on fixed capital employed)
Working capital servicing rate (% on positive working capital employed)
Working capital servicing rate (% on negative working capital employed)
SSRO funding adjustment
Taxpayers can be confident that we are getting value for money as our defence budget rises by 0.5% above inflation each year of this Parliament and we deliver our £178 billion equipment programme. The defence sector is important for our prosperity, supporting highly skilled jobs, and this rate provides a fair return comparable with that in other international markets.
Foreign and Commonwealth Office
Foreign Affairs Council
My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs and my right hon. Friend the Secretary of State for Defence attended the joint session of the Foreign Affairs Council (Foreign and Defence Ministers) on 6 March. The Council was chaired by the High Representative of the European Union for Foreign Affairs and Security Policy, Federica Mogherini. The meeting was held in Brussels.
Foreign Affairs Council
A provisional report of the meeting and conclusions adopted can be found at:
The meeting covered a joint session with Foreign and Defence Ministers on defence. The foreign policy agenda featured Egypt, the western Balkans and the middle east peace process. Ministers also touched briefly on migration.
EU Foreign and Defence Ministers held a joint session to take forward the European Council conclusions of 15 December 2016. The discussion covered: improving the functioning of non-executive military (training) missions through the establishment of a military planning and conduct capability; permanent structured co-operation for better joint capability development; and the co-ordinated annual review on defence. Defence Ministers also discussed the strategic outlook for the EU’s common security and defence policy. The Defence Secretary emphasised the need for EU initiatives to complement NATO and to respect member states’ competence on defence issues. He underlined the UK’s significant contribution and continued commitment to European security and defence, including meeting NATO’s target of 2% of GDP. He stressed the need for European partners to increase national defence spending.
Over lunch, Ministers discussed EU-Egypt relations with the Egyptian Foreign Minister Sameh Shoukry. They discussed political developments, economic reforms, co-operation in various sectors, including counter-terrorism and migration, as well as Egypt’s role in the region, with a particular focus on Libya, Syria and the middle east peace process.
Ms Mogherini briefed the Council on her recent visit to the region. Ministers welcomed the increased EU engagement. They also discussed the challenges facing the western Balkans including increasing tensions, worsening political dynamics and a growing use of inter-ethnic and nationalist rhetoric, compounded by the role of third parties, socioeconomic difficulties and a perception of EU and US disengagement.
Foreign Ministers discussed issues relating to the middle east peace process. The Council discussed preparations for the next EU-Israel Association Council. The HRVP suggested the Council consider holding a similar high-level meeting with the Palestinians.
Ministers agreed without discussion a number of measures:
The Council adopted conclusions on “Implementing the EU global strategy—strengthening synergies between EU climate and energy diplomacies”.
The Council adopted conclusions on the Democratic Republic of the Congo.
The Council adopted the EU guidelines for promotion and protection of the rights of the child (2017)—Leave No Child Behind.
The Council took note of the 18th annual report defining common rules governing controls of exports of military technology and equipment.
The Council adopted the updated military list of the EU in line with the provisions of the common position on arms exports.
The Council adopted the EU-Algeria partnership priorities to be adopted at the EU-Algeria Council, which took place on 13 March.
The Council adopted the EU position for the Association Council with Algeria, which took place on 13 March.
The Council approved a concept note on the operation planning and conduct capabilities for CSDP missions and operations.