The HM Treasury has published the draft Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 on 2 September 2025. This follows the government’s consultation on ‘Improving the Effectiveness of the Money Laundering Regulations’, aiming to address regulatory gaps, enhance proportionality and respond to evolving Money Laundering (“ML”), Terrorist Financing (“TF”) and Proliferation Financing (“PF”) risks.
Key amendments target Customer Due Diligence (“CDD”), Pooled Client Accounts (“PCAs”), trust registration and cryptoasset regulation. The changes seek to create a more risk-based, effective regime that strengthens safeguards against financial crime while reducing unnecessary burdens on businesses, aligning with Financial Action Task Force (“FATF”) standards and support sectoral guidance on Anti-Money Laundering (“AML”), Counter-Terrorist Financing (“CTF”), and Counter-Proliferation Financing (“CPF”) compliance.
Key Developments
- Making Customer Due Diligence More Proportionate and Effective
The draft Statutory Instrument (“SI”) introduces targeted reforms to CDD processes, ensuring they are clearer, more consistent and risk-based:
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- CDD Triggers for Letting Agents and Art Market Participants: The amendments align CDD triggers for these sectors with those applicable to high-value dealers, clarifying when identity verification is required.
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- Onboarding in Bank Insolvency Scenarios: Allows credit institutions to verify customer identities post-account opening in specific insolvency cases, subject to safeguards like FCA notification and exclusion of high-risk customers.
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- Enhanced Due Diligence (“EDD”) for High-Risk Third Countries: The application of EDD will focus on transactions or customers with links to countries on the UK’s high-risk list. Exemptions will apply in low-risk scenarios and where reliance on third-party CDD is permitted under defined conditions.
- Clarifying the Scope of the Regime
Amendments address ambiguities in the MLRs’ application to reduce disproportionate burdens:
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- PCAs: Certain regulated firms (e.g. solicitors, accountants) will be exempt from CDD on PCAs if low-risk criteria are met. These include transparency around client identity and no anonymity of beneficial ownership.
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- Exemptions for Subsidiaries: The existing 25% ownership threshold for exemptions will be removed. Wholly owned subsidiaries of financial or credit institutions will be fully exempt, provided they adhere to group-wide AML/CTF policies and procedures.
- Trust Registration Service Reforms
The SI refines the Trust Registration Service (“TRS”) to exempt low risk trusts and improve proportionality:
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- Exemptions for Specific Trusts: rusts established for vulnerable beneficiaries, co-ownership of land or property (up to four owners), or statutory arrangements for minors or disabled individuals will be exempt from registration. Oversight will remain for higher-risk trust structures.
- Cryptoasset Regulation Enhancements
In alignment with the UK’s evolving crypto regulatory framework, the SI introduces reforms to strengthen ML/TF controls:
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- Registration Requirements: Introduces a ‘fit and proper’ test for beneficial owners, controllers and officers of cryptoasset firms, with a transitional period for existing registrants.
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- EDD in Correspondent Relationships: Requires cryptoasset exchange and custodian wallet providers to apply EDD in correspondent relationships, prohibiting those with shell banks, in line with FATF recommendations.
Additional updates ensure the regime remains current and effective:
- Updating Professional Bodies: Revises the list of recognised supervisory bodies to reflect organisational changes.
- Reporting Inaccuracies: Money service businesses and trust or company service providers (“TCSPs”) supervised by the FCA will be required to report inaccuracies in information supplied to them, supporting improved data accuracy and supervisory oversight.
Next Steps Firms and Stakeholders
Prepare for Implementation
Review internal AML/CTF policies against the proposed changes, particularly in CDD, PCAs, TRS exemptions and cryptoasset controls. Internal gap analyses and policy reviews will be essential to ensure readiness upon the instrument’s enactment.
Monitor Legislative Progress
The final statutory instrument is expected to be laid before Parliament in early 2026 and will come into force 21 days thereafter. Cryptoasset-related provisions will be aligned with updates to the Financial Services and Markets Act 2000 (FSMA) regulatory perimeter.
How Complyport Can Help
Complyport offers tailored solutions to strengthen AML/CTF frameworks, helping firms navigate MLRs amendments and mitigate risks. Our services include:
- AML/CTF/CPF Risk Assessments and Gap Analyses
- CDD and EDD Policy Reviews and Implementation
- Trust Registration and PCA Exemption Support
- ‘Fit and Proper’ Assessments for Cryptoasset businesses
- Staff Training on ML/TF/PF Risks, Digital Verification, and Regulatory Changes
- Supervisory Reporting and Incident Response Planning
- Regulatory Guidance on MLRs, FATF Standards, and HM Treasury Updates
Book a Meeting with a Complyport SME
To learn how to enhance your firm’s AML/CTF strategies and ensure compliance with the draft regulations, book a consultation with a Complyport Subject Matter Expert today.
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