UK Government explores AML reform for Open Banking payment service providers

27 July 2021

On 22 July 2021, HM Treasury published a consultation paper covering various proposed amendments to the UK’s anti-money laundering (AML) framework, including the potential removal of account information services (AIS) from the scope of the Money Laundering Regulations (MLRs). HM Treasury is also inviting feedback on the potential money laundering and terrorist financing (ML/TF) risks presented by payment initiation services (PIS), noting that the potential higher relative risk to AIS may suggest maintaining payment initiative service providers (PISPs) within the scope of the MLRs. PISPs in particular may want to take this opportunity to engage with the consultation process, which will remain open until 14 October 2021, ahead of the proposed introduction of final legislation in Spring 2022.

The perceived disconnect between the compliance burden on account information service providers (AISPs), who provide “information only” services to customers to enable them to view consolidated financial information about multiple accounts, and the actual ML/TF risks their services are exposed to has been observed by market participants for some time. This had led to different approaches in practice as to the level of customer due diligence that AISPs carry out. The European Banking Authority (EBA) has also recently consulted on and issued updates to its Guidelines on ML/TF risk factors (link), explaining that it had received the largest number of responses in relation to the risks posed by AISPs and PISPs, acknowledging that “the inherent ML/TF risk associated with them is limited”. PISPs are involved in the payment chain but do not execute payment transactions themselves and do not hold payment service users’ funds. However, it appears at least initially that HM Treasury is potentially less inclined to remove PISPs from the scope of the MLRs.

The consultation paper also covers various other potential changes to the AML framework, including:

  • The potential removal of bill payment service providers, and telecom, digital, and IT payment servicer providers from the scope of the MLRs.
  • Clarification of the scope of the MLRs with regards to artists selling works of art that they have created over the EUR 10,000 threshold, and the potential creation of a clear artists’ exemption.
  • Certain other clarificatory changes to strengthen supervision, including potentially allowing AML/counter terrorism financing (CTF) supervisors to access the content of firm’s suspicious activity reports (SARs), and clarifying the application of the MLRs to credit and financial institutions.
  • Introducing new requirements to do with proliferation financing (i.e. financing of nuclear, chemical or biological weapons), to align the MLRs with the international Financial Action Taskforce’s standards, and to bring the formation of limited partnerships which are registered in England and Wales or Northern Ireland within the scope of the services listed for Trust and Company Service Providers (Scottish limited partnerships are already included as they are “legal persons”).
  • Improving the effectiveness of intelligence and information sharing, including by expanding the list of relevant authorities in the MLRs to explicitly include government agencies such as Companies House.
  • Replicating the requirements for financial institutions to send and record information on the originator and beneficiary of a wire transfer so that this is extended to cover the cryptoasset sector, in particular cryptoasset exchange providers and custodian wallet providers who facilitate the transfer of cryptoassets.
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Jargon Buster

Agency Database

  • Bank of Spain
    Term:
    Bank of Spain
    Other Names:
    Banco de Espana
    Definition:
    Central bank. The competent authority for the supervision of payment institutions (note the competent authority for the authorization of payment institutions is the Spanish Ministry of Finance).
    Area:
    Type:
    Regulator
    Country:
    Spain
    URL:
    http://www.bde.es/bde/en/
  • Bank of Slovenia
    Term:
    Bank of Slovenia
    Other Names:
    Banka Slovenije (BSI)
    Definition:
    This is the central bank of the Republic of Slovenia. It implements the common monetary policy; co-manages the official foreign reserves of the monetary system; promotes smooth operation of payment systems. It is also the competent authority for the authorisation and supervision of payment institutions (banks, credit institutions) and it maintains accounts for Republic of Slovenia, government bodies and public entities.
    Area:
    Type:
    Regulator
    Country:
    Slovenia
    URL:
    http://www.bsi.si/en/
  • Bank of Portugal
    Term:
    Bank of Portugal
    Other Names:
    Banco de Portugal
    Definition:
    Area:
    Type:
    Regulator
    Country:
    Portugal
    URL:
    https://www.bportugal.pt/
  • Bank of Italy
    Term:
    Bank of Italy
    Other Names:
    Banca d’Italia
    Definition:
    Central bank: banking and financial supervision. The competent authority for the authorisation and supervision of payment institutions (article 20).
    Area:
    Type:
    Regulator
    Country:
    Italy
    URL:
    https://www.bancaditalia.it/homepage/index.html?com.dotmarketing.htmlpage.language=1
  • Bank of Greece
    Term:
    Bank of Greece
    Other Names:
    Definition:
    Responsible for implementing the Eurosystem's monetary policy in Greece and safeguarding the stability of the Greek financial system.The competent authority for the authorization and supervision of payment institutions.
    Area:
    Type:
    Regulator
    Country:
    Greece
    URL:
    https://www.bankofgreece.gr/en/homepage
  • Bank of France
    Term:
    Bank of France
    Other Names:
    Banque de France
    Definition:
    Monitors and regulates the banking market. Competent authority for the authorisation and supervision of payment institutions (specifically within the Bank La comité des établissements de credit et des entreprises d'investissement and La Commission bancaire).
    Area:
    Type:
    Regulator
    Country:
    France
    URL:
    http://www.banque-france.fr/accueil.html
  • Bulgarian National Bank
    Term:
    Bulgarian National Bank
    Other Names:
    BNB
    Definition:
    Regulates and supervises other banks' activities for the purpose of ensuring the stability of the banking system and protecting depositors' interests. The competent authority for the authorisation and supervision of payment institutions.
    Area:
    Type:
    Regulator
    Country:
    Bulgaria
    URL:
    http://www.bnb.bg/?toLang=_EN
  • Swiss Financial Market Supervisory Authority
    Term:
    Swiss Financial Market Supervisory Authority
    Other Names:
    FINMA
    Definition:
    Area:
    Type:
    Regulator
    Country:
    Switzerland
    URL:
    http://www.finma.ch/e/Pages/default.aspx