The compliance burden of the anti-money laundering regime should be reduced if changes put forward by the UK regulator materialise, according to lawyers.
The Financial Conduct Authority has called for centralised transaction monitoring to achieve economies of scale and to enable firms and law enforcement agents to see the bigger picture in deciding what is and is not suspicious.
It also said criminal liability for money laundering-reporting officers who breach the suspicious activity reporting (SAR) provisions of the Proceeds of Crime Act should be abolished. The FCA said this can lead to overly conservative and defensive reporting, which undermines the quality and utility of SARs.
Customer due diligence reliance provisions should also be relaxed as in their current form they lead to a reluctance among firms to share information, the FCA added.
The issues have been raised with the UK government, which will be responsible for mobilising any changes.
The FCA will soon begin inspecting a random sample of firms it supervises under AML laws. It expects to review around 100 firms annually, including financial advisers and smaller operators.
“It will test the FCA’s perception that bigger businesses to some extent police smaller firms’ efforts to tackle financial crime,” said Aaron Stephens, a partner and head of corporate crime and investigations at Berwin Leighton Paisner.
The FCA will update it financial crime guide in 2017 to take account of new UK regulations implementing the EU’s fourth money-laundering directive. Among other issues, it will cover how to differentiate between higher-risk and lower-risk politically exposed persons.