Unpacking the 2025 MLRs Amendments

TLT picks out the key points you shouldn't miss...

What’s this about?

On 2 September 2025 HM Treasury (HMT) published a draft of the Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (the draft SI) alongside a policy note detailing the policy intention of the draft SI. These changes aim to close regulatory loopholes, improve proportionality, and address evolving risks in the UK’s anti money laundering and counter-terrorist financing regime.

Our Head of Risk and Financial Crime, Ben Cooper says...

“These UK proposals mark a shift toward a more proportionate and risk-based AML regime, particularly in how enhanced due diligence is applied and pooled client accounts are assessed. But firms operating across borders will need to consider the growing divergence with the EU’s new AML framework — which introduces a directly applicable regulation, tighter due diligence standards, and a centralised supervisory authority.

Enhanced Due Diligence (EDD) narrowed to FATF “call for action countries”

EDD will now apply only to jurisdictions on the FATF’s “call for action” list, removing the broader requirement to apply EDD to countries under “increased monitoring”. This change allows firms to focus resources on genuinely high-risk jurisdictions and aligns with a more targeted risk-based approach.

Clarification of EDD triggers for complex or large transactions

EDD is now required only for transactions that are “unusually complex or unusually large” relative to sector norms. This refinement is intended to prevent firms from applying EDD to routine transactions that do not pose elevated risks, thereby improving proportionality in compliance efforts.

Pooled Client Accounts (PCAs) removed from Simplified Due Diligence (SDD)

The draft SI decouples PCAs from the SDD framework. Banks must no longer treat PCAs as inherently low risk or restrict them to AML-regulated customers. Instead, firms must assess PCA risks independently, understand the account’s purpose, and be able to identify underlying clients when requested.

CDD triggers aligned for non-financial firms

Letting agents and art market participants will be required to follow transaction-based CDD triggers similar to those used by high-value dealers. This alignment will aim to improve consistency across sectors and clarifies when due diligence is required.

Bank insolvency onboarding exception introduced

Credit institutions may onboard customers from insolvent banks before verifying identity, provided verification is completed promptly and the FCA is notified. This aims to support continuity of banking services during insolvency events while maintaining regulatory oversight.

Cryptoasset registration and control thresholds aligned with FSMA

The draft SI updates the fit and proper test and change of control notification requirements for cryptoasset firms to align with the Financial Services and Markets Act 2000 (FSMA). This includes shifting the focus from beneficial owners to FSMA-defined controllers and harmonising thresholds for pre- and post-FSMA regimes.

At a glance...

Publication link	Draft SI Policy Note
Published date	2 September 2025
Who has published it?	HMT
Publication type	Draft SI and Policy Note
Any key dates?	Feedback by 30 September 2025
What's it relevant to?	Banks, Financial Institutions

Authors: Ben Cooper and Meghan Millward

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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Date published

10 Sep 2025