United Kingdom

The Money Laundering & Terrorist Financing (Amendment) Regulations 2023 came into force on 10 January 2024. This statutory instrument, issued under the Sanctions and Anti-Money Laundering Act 2018, amends the 2017 Money Laundering Regulations (MLRs) to refine the application of enhanced due diligence requirements for politically exposed persons (PEPs), especially those considered domestic.

Focus of the 2023 Amendment

The amendment targets Regulation 35 of the MLRs, which governs enhanced customer due diligence (EDD) measures for PEPs. Specifically, it introduces a distinction between domestic and non-domestic PEPs. For domestic PEPs, or their family members and known close associates, the assessment must begin with the assumption that they pose a lower level of money laundering risk compared to non-domestic PEPs. If no other risk indicators are present, the extent of EDD applied can be reduced accordingly.

Definition & Risk Differentiation

A domestic PEP is defined as someone entrusted with prominent public functions by the United Kingdom. In contrast, a non-domestic PEP holds similar roles in jurisdictions outside the UK. The amendment also defines enhanced risk factors as those that go beyond the person's status as a domestic PEP or association with one. In cases where these additional risk factors do not exist, financial institutions are encouraged to tailor the level of due diligence rather than applying blanket EDD measures.

Practical Implications

The amendment reflects a more proportionate and risk-based approach to compliance, intended to prevent unnecessary friction for UK-based public officials and their affiliates. It aligns with section 77 of the Financial Services and Markets Act 2023, which obliges HM Treasury to take steps to ensure this lower risk starting point is enshrined in regulation. The goal is to strike a balance between safeguarding the financial system and maintaining reasonable access to services for legitimate domestic actors.

Impact Assessment

A full impact assessment was not deemed necessary due to the limited expected effect on the private or public sectors. HM Treasury published a de minimis assessment alongside the explanatory memorandum, indicating minimal cost or disruption from the regulatory change.

Conclusion: WTR Compliance Integration

The 2023 amendment to the UK’s Money Laundering Regulations marks a targeted evolution in the country’s implementation of the FATF Travel Rule. By clearly distinguishing domestic PEPs from their international counterparts in risk profiling, it reinforces the UK’s commitment to a calibrated, intelligence-led AML regime that avoids unnecessary burdens while maintaining robust financial safeguards.