Treasury Response to their AML Consultation

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4 Main Themes

The Treasury consultation in 2024, covered four main themes. In July 2025, the Government published its response outlining specific changes and next steps:

1. Making Customer Due Diligence (CDD) More Proportionate and Effective:

Considering	Finding	Decision
Customer Due Diligence (CDD) Triggers for non-financial firms	majority of responders thought that the triggers, were clear confusion arose - concept - 'business relationship,' especially for sectors - art market participants, high-value dealers, and letting agents	no fundamental change to the regulations Supervisors and industry bodies to review and clarify sector-specific AML guidance on 'business relationship.' A minor MLR amendment will align transaction-based CDD triggers for art market participants and letting agents with high-value dealers to avoid overlap.
Source of Funds Checks as part of ongoing monitoring	lack of agreement on additional guidance clarity where necessary	retain current MLRs wording for flexibility supervisors and industry bodies - improve sector specific guidance clarifying SoF check necessary when transactions are inconsistent with firm's understanding of the customer and their risk profile explore dedicated educational tools
Verifying whether someone is acting on behalf of a customer	split responses key concern - financial sector on whether employees acting for their companies fall under "acting on behalf of" require CDD	The Treasury clarifies that employees acting for their employers are generally not subject to Regulation 28(10) CDD obligations as they are considered to be acting as the organisation itself. Sectoral guidance will be reviewed for consistency and clarity to address over-compliance
Digital Identity Verification	The government in support of their ID wallets	The Treasury and the Department for Science, Innovation and Technology (DSIT) will jointly produce guidance, clarifying digital identity definitions and their use within a risk-based approach. This guidance will interact with the Data (Use and Access) Act 2025, which establishes a statutory framework of standards and a register of certified digital identity services, addressing the call for accreditation.
Onboarding of Customers in Bank Insolvency Scenarios	Recognition of potential onboarding backlogs in rare bank insolvency scenarios	HM Treasury will amend the MLRs to provide for relevant carve-outs from CDD requirements for banks onboarding new customers from an insolvent bank immediately after an insolvency. This carve-out is temporary, requiring full CDD as soon as practicable and FCA notification and supervision
Enhanced Due Diligence (EDD) Prescribed Risk Factors for EDD	Most respondents had not used specific factors to identify suspicious activity, but many felt they should be retained as signals of potential high risk. No consensus on removing or adding factors, but a need for clearer guidance on mandatory vs. consideration factors.	The list of EDD risk factors will be maintained. HM Treasury will work with supervisors and industry bodies to provide clear guidance distinguishing between factors that require mandatory EDD and those that inform a firm's overall risk assessment.
Complex or unusually large’ transactions	A minority felt the current requirement led to disproportionate EDD on "complex" transactions due to a lack of definition, especially in sectors where most transactions are inherently complex. Strong support for additional guidance and amending regulations to focus on "unusually complex" transactions.	MLRs will be amended to require EDD on "unusually complex" transactions, while the requirement for "unusually large" transactions remains. This aims to ensure EDD is targeted and proportionate, aligning with the UK’s risk-based approach and FATF recommendations.
High-Risk Third Countries (HRTCs):	Many concerns that mandatory EDD for FATF-listed countries didn't always reflect specific UK illicit finance risk. Calls for a more targeted approach.	MLRs will be amended to mandate EDD only for transactions or customer relationships involving a person established in a FATF "Call for Action" country, not those on the "Increased Monitoring List." Broader requirements to assess geographic risk, considering both FATF lists and the UK's National Risk Assessment (NRA), will remain. This aims to allow firms to focus resources on higher-value compliance activities.
Simplified Due Diligence (SDD) Pooled Client Accounts (PCAs)	Financial sector feedback suggested proposed SDD changes would not significantly improve PCA provision due to the current restrictive link between PCAs and SDD.	The link between PCAs and SDD in the MLRs will be removed. New MLR provisions will allow financial institutions to offer PCAs under wider circumstances, with built-in protections requiring assessment of purpose and ML/TF risk. Financial institutions will not be required to conduct CDD on underlying customers, but information on their identity must be available on request. This aims to increase PCA provision while maintaining safeguards.

2. Strengthening System Coordination

	Problem	Solution
Information Sharing	Confusion around legislative gateways for information sharing.	Current list of bodies for Regulation 52 deemed broadly appropriate. Financial Regulators Complaints Commissioner (FRCC) to be added to Regulation 52. Minor changes to Regulations 52A and 52B to expand scope of confidential information sharing by FCA.
Cooperation with Companies House (CH)	Need for stronger cooperation between supervisors and CH	Amend Regulation 50 of the MLRs to include the Registrar for Companies House and the Secretary of State responsible for CH, fostering more effective cooperation.
National Risk Assessment (NRA	No strong consensus on explicitly mandating firms to use NRA as primary source	MLRs will not be amended to specifically mandate regard for the NRA, as firms already use it. Guidance on risk assessments to be improved.
System Prioritisation and the NRA	Need for clarity on how NRA and system priorities interact.	No MLRs change needed. Government to publish further details on interaction when new priorities are set.

3. Providing Clarity on Scope and Registration Issues

	Problem	Resolution
Currency Threshold	Use of EUR causes confusion and administrative burden.	References to EUR in the MLRs will be changed to GBP, generally using a one-to-one conversion (except where it undermines FATF thresholds)
Regulation of Sale of 'Off-the-Shelf' Companies by TCSPs	Gap in MLR coverage; no CDD required for onward sale of pre-formed companies.	MLRs to be amended to include the sale of off-the-shelf companies within the scope of regulated TCSP activity, ensuring CDD is performed.
Registration and Change in Control for Cryptoasset Service Providers	Dual registration requirements (MLRs and FSMA) and need for alignment.	Future legislative reforms will extend FSMA to parts of the cryptoasset market, meaning firms authorised under FSMA will not need separate MLR registration. Registration and change in control thresholds to align with FSMA.

4. Reforming Registration Requirements for the Trust Registration Service (TRS)

	Problem	Resolution
Registration of Non-UK Express Trusts Holding UK Land	Reporting gap for non-UK express trusts with no UK trustees that acquired UK land before 6 October 2020.	Expand TRS registration to include all non-UK trusts that retain an interest in UK land acquired before 6 October 2020. These will also be subject to TRS data sharing rules (with a legitimate interest test).
Trusts Required to Register Following a Death	Inconsistent administrative deadlines for trusts arising from death.	Amend Schedule 3A of the MLRs to exempt certain trusts (co-ownership property, Trustee Act 1925 s34 trusts, deed of variation trusts) from registration for two years following the settlor's death.
Scottish Survivorship Destination Trusts	These low-risk trusts currently require TRS registration.	Amend Schedule 3A to exclude Scottish survivorship destination trusts from TRS registration.
De Minimis Exemption for Registration	Small, low-value non-taxable trusts are disproportionately impacted by registration burden.	Introduce a de minimis exemption for certain trusts not liable for UK taxes, not holding UK land, not exceeding £10,000 in accumulated assets, not having more than £5,000 income annually, and not having more than £2,000 of "appreciable" non-financial assets. This is not retrospective and applies to new trusts.

Proposed Further MLRs Revisions

	Problem	Resolution
Alignment of MLRs with FSMA Exemption Order	Inconsistency between MLRs and FSMA regarding overseas sovereign wealth funds.	MLRs will be amended so that certain overseas sovereign wealth funds operated by a central bank or public body, already exempt under FSMA, will also be exempt from relevant parts of the MLRs.
Definition of Insurance Undertaking	Uncertainty regarding the inclusion of reinsurance contracts in the definition of "insurance undertaking."	Amend MLRs to clarify that the definition of 'insurance undertaking' does not include reinsurance contracts for primary long-term insurance contracts, as they present a low ML/TF risk.
Counterparty Due Diligence for Cryptoasset Firms	Need to align UK requirements with FATF recommendations for cryptoasset businesses.	Changes planned to align certain MLR requirements for cryptoasset businesses with existing requirements for credit and financial institutions, focusing on FATF Recommendations 13 and 15.
Registration of Trusts Liable for Stamp Duty Reserve Tax (SDRT)	SDRT liability currently triggers TRS registration, even for small transactions or non-UK trusts, creating administrative burden and disincentivising UK investment.	Remove SDRT from the list of "relevant taxes" that trigger TRS registration. Other relevant taxes will remain triggers.

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This post does not provide legal or regulatory advice, nor is it to be construed as such.

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