HM Treasury's MLRs reform response

The Treasury’s response acknowledges widespread concerns that the current CDD framework is overly prescriptive and often misaligned with actual risk. The government proposes:

• Clarified thresholds for Simplified Due Diligence (SDD): Firms will benefit from clearer guidance on when SDD is appropriate, particularly in low-risk scenarios such as pooled accounts.
• Refined triggers for Enhanced Due Diligence (EDD): The response seeks to better align EDD obligations with genuine risk indicators, reducing unnecessary burdens on firms dealing with low-risk customers. The Treasury intends to make changes to the EDD on complex transactions and high-risk third countries.
• Improved guidance on ongoing monitoring: The Treasury commits to working with supervisors to ensure firms can adopt a proportionate approach to transaction monitoring, particularly for long-standing, low-risk relationships.

This shift reflects a broader policy trend: empowering firms to exercise professional judgment within a clearer regulatory perimeter.

The consultation response recognises that fragmentation across the UK’s AML supervisory regime has led to inconsistent enforcement and inefficiencies. Key proposals include:

• Enhanced role for OPBAS: The Office for Professional Body AML Supervision will be given a more strategic mandate to drive consistency and raise supervisory standards.
• Improved data sharing: The government will explore legislative and technical solutions to facilitate better information exchange between supervisors, law enforcement, and regulated entities.
• Alignment with the National Risk Assessment (NRA): Supervisors will be expected to prioritise resources in line with the NRA, ensuring a more intelligence-led approach to supervision.

These reforms aim to create a more coherent and responsive AML ecosystem, capable of adapting to evolving threats.

The response addresses several grey areas in the current MLRs, particularly around the scope of regulated activities and registration obligations:

• Cryptoasset service providers: The government proposes a clearer definition of what constitutes a change in control, triggering re-registration requirements.
• Trust or Company Service Providers: New rules will target the resale of “off-the-shelf” companies, a known vulnerability in the UK’s corporate transparency regime.
• Currency thresholds: The Treasury is considering adjustments to the cash transaction thresholds that trigger AML obligations, to reflect inflation and evolving risk profiles.

These changes are designed to close loopholes without imposing unnecessary burdens on legitimate businesses.

Echoing the government’s broader deregulatory agenda, the response emphasises the need for a risk-based, proportionate approach that supports innovation and competitiveness without compromising on financial integrity.