Firms Face Tough Time Implementing UK Money Laundering Rules

by Robin Pilgrim, LawAndTax-News.com, London

15 February 2006

Professional services firm, Huntswood on Monday warned that the UK's new money laundering regime will impact upon various areas of a firm's operational processes and business areas, including systems and controls, roles and responsibilities and corporate governance.

The FSA's Money Laundering sourcebook will be revoked in its entirety and replaced by high level rules contained in the Systems and Controls sourcebook. Firms have until 31st August 2006 to comply with the new 'risk-based' regime.

According to Huntswood, industry figures have indicated that due to the magnitude of the changes involved a minimum of 18 months is required for implementation. Despite this, the FSA is pressing ahead with the planned 6 months implementation period and has indicated that the new regime is an area in which it intends to take an active interest.

Eurfron Jones, Huntswood's Head of Consulting, observed that:

“It is clear that firms have a tough six months ahead and that implementing the new regime will place burdens on firms' systems and resources. However, this is also an opportunity for firms to continue to improve their practices and treat their customers in a way that will promote long term business and customer satisfaction.”

Also on Monday, the UK's Chancellor of the Exchequer, Gordon Brown, set out new measures to further strengthen the financial system's ability to deny terrorists funds, identify and investigate terrorist networks and disrupt terrorist activity through swift, pre-emptive strikes.

In a speech on national security - which has divided observers, as it appears to be stretching his remit as Chancellor somewhat - to the Royal United Services Institute (RUSI) in London, Mr Brown explained that:

"We need not only to deny a safe haven to terrorists, but ensure there is no hiding place for those who finance terrorism. Since 2001 we have frozen assets of terrorists of nearly £80 million - including for over 100 organisations with links to Al Qaeda. Today I am announcing new measures to prevent terrorist financing, identify suspicious transactions, and disrupt terrorist activity."

The Chancellor has also written to the Financial Action Task Force (FATF) - the international standard-setter on counter-terrorist finance issues - requesting that the UK assumes the Presidency of FATF in 2007.

Among the proposals unveiled by the Chancellor yesterday were:

• A joint review with the Home Office of how best to root-out terrorist abuse of the charitable sector and protect donor confidence;
• New proposals to strengthen safeguards introduced after September 11th for "Money Service Businesses" - and thereby protect the integrity of global remittance flows;
• New guidance to help firms target their efforts to detect terrorist financing on the areas of highest risk and ensure that senior managers in firms take responsibility for the financial crime risks that they face;
• A new dedicated forum bringing together Government and the financial services sector to identify and challenge terrorist threats; and
• Strengthening the Treasury's asset-freezing operation, through greater joint working with other departments and agencies in order to disrupt terrorist networks when they come to light.

This followed the recent publication by the Joint Money Laundering Steering Group (JMLSG) of new guidance on the prevention of money laundering and the financing of terrorism for the financial services industry.

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