Wednesday, 08 June 2011

http://www.smeweb.com/content/view/2704/97/

Yesterday the Treasury published a proposal of improvements to the Money Laundering Regulations 2007. These regulations require regulated businesses to have appropriate systems and controls in place to identify and verify the identity of their customers and carry out ongoing monitoring as appropriate.

The new proposal includes a general exclusion for very small businesses (for example those with below £13,000 VAT-exclusive turnover per annum), or a reduction in the requirements placed on such businesses.

The Commercial Secretary, Lord Sassoon: "We believe that we can make the regulations more effective and proportionate by removing a range of criminal penalties on all businesses and by lifting the burdens on the smallest businesses. This will modestly reduce the burden on business, without damaging the fight against money laundering."

No longer "one size fits all"

Mark Coronna, Chief Marketing and Product Officer at Wolters Kluwer Financial Services says:

"Relaxing anti-money laundering rules is important in that it recognizes that regulatory costs and demands impact different sized businesses differently. Smaller firms often have the same business scope as their larger peers, but they just have fewer customers and transactions. This proposal seems to match costs and risks in a more appropriate way for these smaller businesses.

"It is also interesting that this proposal seems to be an opposite trend to the "one size fits all" regulation that some see on the horizon with stronger EU-wide regulation through the new regulatory bodies, especially in financial services."

Illegal exploitation

However, Steve Hancock, professional services director at AML Analytics, adds that the new proposal may have unintended consequences.

"Although the idea of reducing the regulatory burden on small companies can be regarded as a laudable aim a relaxation may actually encourage criminal elements to focus there attention on SMEs as a short-cut to get laundered money into the financial system.

"History has shown us that often criminals are one step ahead of the authorities in this regard and without stringent regulations in place this may prove to be a weak point that is exploited for illegal activity in the future."

The consultation closes on 30 August 2011.