AML and KYC are two of the most important acronyms in the financial industry. They stand for Know Your Customer and Anti-Money Laundering, and they reference the guidelines and processes that regulators use to protect consumers and eliminate illegal activities.
UK operators are expected to abide by these strict regulations. But what is the current state of KYC and AML in the UK, where are things going, and what can operators do to stay on top of these guidelines?
What are the Latest AML and KYC Policies in the UK?
UK regulators are taking more and more steps to clamp down on money launderers and the operators that facilitate their transactions.
Operators are required to conduct checks on their customers before they sign up and to ensure those checks are maintained during their time on the site/service. They must also follow any industry-specific rules and complete their own due diligence when monitoring transactions and activities.
In 2023, we could see some major changes to KYC laws thanks to the Economic Crime and Corporate Transparency Bill, which is still going through the House of Lords as of late-Feb.
Some of the changes proposed by this bill include:
Individuals who have significant control within a company must verify their identity with Companies House. This could also include overseas companies that are registered in the UK.
When setting up a company through Companies House, individuals will be asked to pass an identity check to confirm that they are who they say they are.
Companies that notice discrepancies when conducting due diligence must report those discrepancies to Companies House.
If the bill passes, law enforcement could be given more power to seize assets, particularly those related to cryptocurrencies.
These are just a few of the methods that could be implemented this year. The changes to the UK AML/KYC landscape will be slight, but these changes are still ongoing and the regulations look decidedly different than they did 10 and even 5 years ago.
Generally speaking, regulators are doing their best to create greater regulation and control in several industries that are prone to money laundering, including investing, banking, online gambling, cryptocurrencies, and the legal sector.
What Does the Future Hold?
It is clear that UK regulators are taking steps to protect consumers and cut down on money laundering. It’s no surprise when you consider that money laundering costs the country an estimated £100+ billion every year.
Regulators are also keen to limit problem gambling/underage gambling in the casino/betting industries and prevent sanctioned individuals from accessing UK banking infrastructure.
Furthermore, we’re seeing additional guidelines being implemented in industries that haven’t always been subject to such strict rules. For instance, “art market participants” were brought under the jurisdiction of AML guidelines in 2020 via something known as The Money Laundering and Terrorist Financing (Amendment) Regulations 2019.
It applied AML regulations to transactions worth at least 5-figures, including sales of paintings, limited edition prints, tapestries, collages, and other artworks. AML guidelines were updated for art market participants in the summer of 2022.
We may also see regulators move on the cryptocurrency sector, which has been relatively untouched thus far. Every year, billions of dollars are laundered in cryptocurrencies around the world and the nature of these transactions means they are hard to track. It’s a concern for financial regulators and in early 2023, the UK government set out plans to safeguard the industry and protect consumers.
All things considered, it’s fair to assume that we’ll see more stringent AML/KYC checks and regulations and that they will apply to a broader range of industries.
Why Are These Policies Used?
KYC and AML checks serve a variety of purposes depending on the industry. Their main purpose is to prevent money laundering and keep criminals away from legitimate financial infrastructure. In doing so, they reduce the amount of illegal money that flows through the financial sector, keeping it out of the pockets of terrorists and organised criminal gangs.
These regulations also combat other types of financial crime, including corruption. Just as importantly, by learning more about their customers, operators can prevent dangerous/high-risk behaviour (such as underage gambling/trading) and ensure that stolen credit/debit card numbers are not being used to process transactions.
Why Must Operators Abide By These Regulations?
Regulators have been known to impose sizeable fines on organisations that fail to meet AML and KYC guidelines. The size of these fines varies, but there have been some substantial rulings over the years and these are increasing in number.
We mentioned Santander’s fine above, but there have been many others. In 2022 alone, 888 UK Limited, Ghana International Bank, Danske Bank, Robeco, and TJM Partnership were all hit with 7-figure fines relating to AML guidelines.
There have also been a couple of major fines in 2023. The Financial Conduct Authority (FCA) fined Al Rayan Bank PLC over £4 million and Guaranty Trust Bank over £7.6 million. The first related to breaches in the retail banking sector while the second was in reference to wholesale banking.
Regardless of your sector or the size of your company, if AML/KYC regulations apply to you then it’s essential that you stay on top of them.
How to Stay on Top of AML/KYC Guidelines in the UK
Effective AML and KYC compliance requires a stable and efficient framework, as well as the experience that comes from years of regulatory compliance. That’s where A Data Pro comes in.
We offer a wealth of due diligence reports to keep your business compliant and help you to operate legally, fairly, and within the confines of industry rules. We even help with sanction lists, checking for sanctioned corporations and individuals and keeping your business clean.
Get in touch with A Data Pro today to learn how we can help you with AML/KYC compliance in the United Kingdom.