From the Professional Accountancy team…...
Draft legislation has been introduced by UK Parliament which proposes changes to improve the effectiveness, proportionality, and clarity of the UK AML/CTF regime and to ensure compliance with FATF standards. The legislation will amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“2017 Regulations”). The draft legislation is the Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (“2026 Regulations”).
The explanatory memorandum states that the 2026 Regulations make targeted changes prior to the next comprehensive review of the 2017 Regulations, which is due to be conducted in 2027.
Effective dates
We understand that the 2026 Regulations are expected to come into force in late June or early July 2026 and there are various provisions with later proposed commencement dates.
Below are some of the changes, which may be of interest to our members when the 2026 Regulations come into effect.
Change for EDD from high-risk 3rd country to FATF call for action country
A change is proposed in the application of enhanced customer due diligence (EDD) for high-risk third countries. The current requirement is to apply enhanced CDD to jurisdictions listed by FATF, which include FATF ‘High-Risk Jurisdictions subject to a Call for Action’ (black list) and ‘Jurisdictions under ‘Increased Monitoring’ (grey list). It is proposed that the EDD obligations will apply to FATF “call for action” countries only. Currently this includes Iran, North Korea and Myanmar. This is a significant divergence from the EU position regarding high-risk third countries. It should be noted that jurisdictions being subject to increased monitoring by FATF will continue to be a (geographical) risk factor that should be considered in firms’ risk assessments under 33(6)(c) of the 2017 Regulations.
TCSPs –“off the shelf firms”
The 2026 Regulations will bring the sale of “off-the-shelf” firms within the scope of regulated trust or company service provider (TCSP) activity so that they must comply with AML and CTF regulations, including conducting customer due diligence, maintaining records, and reporting suspicious activities. “Off the shelf” is defined as a firm that either does not carry on business or carries on business, but such business is not the main activity carried on by the TCSP.
Pooled accounts
The 2026 Regulations make some new provisions for pooled accounts . An example of a pooled account is where an accountancy firm holds monies on behalf of a client in a pooled account opened with a financial institution. .The financial institution has obligations under these new pooled account rules (such as taking reasonable measures to understand the purpose of the account and how the customer will use it). The accountancy firm also has obligations under the 2026 Regulations including:
-make available on request information on the identity of the persons and any beneficial owners on whose behalf monies are held in the pooled account
-maintain accurate and up-to-date written records of all the monies paid into and out of the pooled account for a five-year period
-on request by any law enforcement authority provide information to them about itself and the management and use of any pooled account
There is no obligation to provide that information in cases of legal professional privilege and any disclosures made pursuant to the above requirements (i.e. either to the financial institution or law enforcement ) is not a breach of any restriction on the disclosure of information.
Removal of Euro references
The proposed changes update currency thresholds so that they are in Sterling. The changes will reduce administrative burden by making it easier to apply transaction thresholds for CDD. Previously the thresholds were not clearly aligned with FATF thresholds in some cases when converted.
“Unusually complex or unusually large”
The 2026 Regulations will change one of the enhanced due diligence triggers in the 2017 Regulations. Currently one of the triggers is a transaction that is “complex or unusually large”. This will be changed to a transaction that is unusually complex or unusually large in each case given the nature of the transaction.
Other
The 2026 Regulations also propose changes for cryptoassets businesses and changes for insolvent bank customers. This includes rapid onboarding of customers who are migrating accounts following a bank insolvency. Changes are also proposed in relation to Trust registration services. Readers can read full details in the links provided above.
This information is provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.
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