Policy paper

Preventing money laundering

Published 5 June 2013

Money laundering is used by criminals to conceal money made through criminal activity. As a global financial centre the UK is often seen as an attractive destination for criminals to invest the proceeds of their crime.

1. Financial Action Task Force (FATF)

The Treasury leads the UK’s contribution to international policy development on anti-money laundering and terrorist finance.

The Financial Action Task Force (FATF) is the leading inter-governmental body that sets global standards on tackling money laundering and terrorist finance. The UK is a founding member of the FATF and played an instrumental role in its development.

Today, the FATF is made up of 34 member countries, all of which are evaluated against the 40 recommendations and nine special recommendations to establish their level of compliance and identify areas where improvement is needed.

Together with a network of associated regional bodies, the member countries meet regularly to review progress being made and address issues of concern.

2. Strengthening European standards

We are working with the European Commission to ensure that cross-European legislation is strong enough to prevent the use of the financial system for money laundering.

We have:

3. The Money Laundering Advisory Committee

HM Treasury and the Home Office co-chair the Money Laundering Advisory Committee, which advises the government on its approach to preventing money laundering in the UK. Members include representatives from law enforcement, government, industry and regulators. The committee reviews industry guidance before it is approved by the Treasury.

4. Supervision of the anti-money laundering sector

The Treasury appoints supervisors to monitor the anti-money laundering and counter terrorist finance sector. In order to improve the transparency and accountability of supervision and to encourage good practice, the Treasury has worked with supervisors to develop an annual report on anti money laundering and counter terrorist finance supervision.

The first annual report on anti money laundering and counter terrorist finance supervision was published in November 2011.

5. Providing guidance to industry and government

There are a number of industry and government bodies responsible for providing advice to businesses and ensuring compliance with the regulations. The Treasury approves guidance written by industry to help businesses understand how they should implement the regulations in practice. Courts must take into account whether an individual followed approved guidance notes when making decisions in relation to suspected money laundering.

HM Treasury also issues Advisory Notices regarding the risks posed by unsatisfactory money laundering and terrorist financing controls in a number of jurisdictions. Under the Counter Terrorism Act 2008, firms are required to undertake enhanced due diligence on transactions involving individuals and entities from those jurisdictions.

6. Bills and Legislation

The Money Laundering Regulations 2007 require firms to put policies and procedures in place in order to prevent money laundering and terrorist financing.

Part 7 of the Proceeds of Crime Act 2002 creates the money laundering offences in the UK and requires the making of suspicious activity reports to the Serious Organised Crime Agency.

Transfer of Funds (Information on the Payer) Regulations to enforce regulation 1781/2006/EC set out by the European Parliament and Council, which imposes obligations on payment service providers when they make or receive a transfer of funds.

Control of Cash (Penalties) regulations, under section 2(2) of the European Communities Act 1972 (c.68) allows countries to work together and share information on large-scale movements of cash in or out of the European Union. The regulations also give national authorities the power to take appropriate actions, or to impose penalties.