Recently laid before parliament, the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026 could reform customer due diligence procedures – presenting pertinent considerations for finance and legal professionals alike.
Contributor: Martin Bourne
What is changing?
The draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026 could culminate in a host of changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 – some of which may prove significant.
The 2017 regulations govern how professionals subject to the UK’s Anti-Money Laundering regime (such as bankers, lawyers and accountants) must conduct customer due diligence on their clients. Now, the 2026 regulations:
- Amend anti-money laundering customer due diligence and introduce enhanced due diligence provisions, including in respect of ‘unusually complex or unusually large’ transactions, high‑risk jurisdictions, pooled client accounts, and onboarding of customers following a bank insolvency.
- Converts monetary thresholds from euros to sterling in a manner consistent with Financial Action Task Force standards.
- Updates provisions for crypto asset businesses to align with the Financial Services and Markets Act 2000 framework for crypto assets, which will be introduced in October 2027.
- Expands and refines trust registration requirements in Part 5 and Schedule 3A of the 2017 regulations – including extending registration to certain non‑UK express trusts holding UK land, extending the two-year exemption from registration of trusts arising on death, introducing an exemption for Scottish survivorship destination trusts, and implementing a de minimis exemption for low‑value, low‑risk trusts.
- Removes Stamp Duty Reserve Tax from the list of ‘relevant taxes’ which trigger registration with the trust registration service.
- Clarifies the scope of regulated trust or company service provider activity so that the sale of ‘off‑the‑shelf’ firms is subject to obligations under Money Laundering Regulations.
- Updates information‑sharing and co‑operation provisions so that supervisory authorities can share relevant information with the Registrar of Companies and the Financial Regulators Complaints Commissioner.
How could the changes affect your business?
The changes wrought by the 2026 regulations may not be ground-breaking – but they could have significant ramifications for anyone customer due diligence processes and crypto businesses alike.
For those involved in anti-money laundering customer due diligence processes, the new regulations:
- Make it easier to identify what counts as a 'complex or unusually large' by specifying that 'a transaction is unusually large in each case given the nature of the transaction.' This new wording is important, because it requires relevant persons to judge size and complexity based on the transaction itself, rather than on a general idea of what looks strange.
- Change the definition of ‘High risk jurisdictions’. Under the 2017 regulations, a connection with a high-risk jurisdiction mandates the application of enhanced due diligence. The new definition restricts high-risk jurisdictions to those identified on the Financial Action Task Force’s blacklist (currently only Iran, North Korea and Myanmar), whereas the current definition captured 22 other countries on the Task Force’s grey list (including Monaco, Bulgaria and the British Virgin Islands). The identification of fewer high-risk jurisdictions in the 2017 regulations hardly enhances the fight against money laundering. Many jurisdictions notorious for acquisitive crime and money laundering do not feature on either list, and relevant persons should be guided by the Basel AML Index or Know Your Country Ratings Table in judging whether a jurisdiction is high-risk for money laundering.
- Introduce a risk-based approach to due diligence. Whereas the current regulations permit banks providing ‘pooled’ (client) accounts to apply simplified due diligence, the draft regulations introduce a requirement to apply a risk-based approach to due diligence. This change is likely to result in banks requiring solicitors and other professionals who utilise client accounts to provide more information about their clients, in turn imposing upon them a new administrative burden.
For the crypto sector, the new regulations will:
- Introduce new, enhanced customer due diligence requirements for crypto-asset businesses (such as exchange providers and custodian wallet providers) when they enter into a correspondent relationship with similar providers in other jurisdictions.
- Require crypto-asset businesses to gather information from reliable public sources about the respondent to enable them to (i) understand the respondent’s business, its reputation, and the quality of its AML supervision; and (ii) assess its controls which are designed to stop money laundering and terrorist financing. Businesses will also be required to obtain approval from senior management before entering into such relationships.
- Sharpen regulatory focus on crypto-asset businesses – which have long been identified as attractive to money launderers. Tighter regulation will serve to restrict the extent to which crypto assets can be used to store the proceeds of crime, in turn reducing the customer due diligence burden on relevant persons who receive monies which derive from their clients’ sale of crypto assets.
What steps should you take to prepare?
Affected businesses should review the new draft regulations very carefully, ensure that their policies and processes remain both compliant and fit-for-purpose in light of the changes, and implement training on the changes for their employees.
Key takeaways
- Check whether your policies and processes comply with the new regulations.
- Ensure that any existing measures are still fit-for-purpose.
- Train your employees on the new regulations.
Please be advised that this is an update which we think may be of general interest to our wider client base. The insights are not intended to be exhaustive or targeted at specific sectors as such, and whilst we naturally take every care in putting our articles together, they should not be considered a substitute for obtaining proper legal advice on key issues which your business may face.