14 Jun 2024

techUK responds to the Government consultation on improving money laundering regulations

techUK has submitted its response to the HM Treasury consultation on improving the effectiveness of the money laundering regulations.

On 11 March 2024 HM Treasury (HMT) published a consultation on improving the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the ‘MLRs’), which place requirements onto a range of businesses to identify and prevent money laundering and terrorist financing.

With new technologies being developed and continuing global threat from economic crime and illicit finance, it is more important than ever that businesses have access to the right tools to identify and prevent money laundering and terrorist financing.

The UK’s Money Laundering Regulations (MLRs) form a vital bulwark against the proceeds of crime entering the UK financial system. With new technologies being developed and continuing global threat from economic crime and illicit finance, it is more important than ever that we give businesses the right tools to identify and prevent money laundering and terrorist financing. A balanced and effective AML/CTF (anti-money laundering and counter-terrorist financing) regime protects the UK’s reputation as a modern, safe place to do business, and protects the integrity of the financial system. As a global issue, it is crucial that the UK continues to show leadership on economic crime, driving up standards worldwide and involving the private sector as an active partner.

Baroness Vere of Norbiton

Parliamentary Secretary at HM Treasury

Digital Identity

Digital ID technology is emerging as a powerful tool in the fight against money laundering in the UK. By providing secure, efficient, and cost-effective means of identifying individuals, it can significantly enhance the effectiveness of AML measures. Digital ID technology offers a more robust solution by enabling financial institutions to carry out customer due diligence (CDD) and Know Your Customer (KYC) checks more accurately and efficiently. This can help to identify suspicious activities more quickly, reducing the risk of money laundering.

The potential benefits of digital ID technology in combating money laundering are clear. With the aid of digital ID technology, the processing of such reports could become more efficient and accurate. The Department for Science, Innovation and Technology (DSIT) has created a “digital identity and attributes governance framework” (also known as the “Trust Framework”) which governs private sector suppliers of digital verification services. This framework sets out the rules for the future use of digital identities.

The Department for Science, Innovation and Technology (DSIT) has created a “digital identity and attributes governance framework” (also known as the “Trust Framework”) which governs private sector suppliers of digital verification services. This framework sets out the rules for the future use of digital identities. techUK are pleased that this consultation has a section dedicated to enhancing the role Digital Identity can play to assist government, regulators and law enforcement in combating money laundering.

Key recommendations from techUK

Strengthening understanding of Digital ID: HMT should work with techUK to help build awareness and confidence in utilising Digital ID to help in efforts against money laundering.
Implementation of the Trust Framework could significantly aid for anti-money laundering efforts: HMT should make reference in its MLRs to the DSIT Trust Framework for Digital ID.
Digital ID and robustness of the Trust Framework: HMT should work with DSIT to ensure that the Trust Framework is enshrined in law urgently.
Digital ID and effectiveness of the Trust Framework: HMT should work with DSIT to ensure that the Trust Framework governs the public sector as well as industry, for robust, effective and frictionless AML activities.

Digital Assets

Digital assets aim to provide disruption to traditional models in finance and payments, driving changes in the broader financial ecosystem. Examples of digital assets include cryptocurrencies and tokenisation.

Digital assets have experienced rapid growth, with 516m cryptocurrency users worldwide and a daily trading volume of $116.61bn per 24 hours. The global market capitalisation of cryptocurrencies was approximately $2.37tn on 31 May 2024.

However, many of the benefits of cryptocurrencies pose issues to governments, regulators, and financial institutions due to their anonymity and ease of use in creating a wallet. The United Kingdom has taken a proactive approach to addressing the difficulties posed by digital assets such as cryptocurrencies, particularly those related to money laundering. The Financial Conduct Authority (FCA), the country's financial regulator, has led these initiatives.

Key recommendations from techUK

techUK members have expressed a desire that the MLRs are implemented proportionately: HMT should deliver a proportionate approach to the revision of MLRs, introducing new requirements only where they will add value and deliver against the desired outcomes.
Information sharing: HMT should consider how MLRs can help to facilitate greater sharing of information from all sectors where digital assets can be leveraged, to provide a much fuller picture of trends and intelligence.
National Risk Assessments: HMT and regulators should work with industry to better understand solutions that can help deliver real-time analysis of risk beyond National Risk Assessments.

Click here to download techUK’s full response.

To find out more about our Digital Identity programme, please click here or contact [email protected]

If you want to get more involved with techUK's work focused on Digital Identity, you can join the Digital Identity working group. By signing up you will receive regular updates about upcoming events, opportunities and calls-to-action to get involved with the group outputs.

Alternatively, if you would like more information on our Financial Services programme or National Security programme, please contact [email protected] and [email protected]

Elis Thomas

Programme Manager, Tech and Innovation, techUK

Raya Tsolova

Senior Programme Manager, techUK

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