Money Laundering and Terrorist Financing (Amendment) Regulations 2026

Lord Wilson of Sedgefield Excerpts

Monday 18th May 2026 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Money Laundering and Terrorist Financing (Amendment) Regulations 2026.

Relevant document: 57th Report from the Secondary Legislation Scrutiny Committee, Session 2024-26

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

I beg to move that the Committee considers this package of changes to the money laundering regulations. They are aimed at improving the effectiveness of the UK’s anti-money laundering and counter-terrorist financing regime.

The money laundering regulations sit at the heart of the UK’s preventive, risk-based approach to tackling illicit finance. They ensure that the UK’s modern and open economy cannot be exploited by criminals seeking to hide the proceeds of their crimes. By requiring banks and other regulated businesses to take reasonable, proportionate steps to detect and prevent money laundering and terrorist financing, the regulations protect the integrity of the UK’s financial system.

However, as new technologies emerge and criminals find new ways in which to launder illicit funds, the regulations must evolve with them. The changes before the Committee represent a significant update to the regime. They ensure that the regulations are focused on the highest-risk activities and threats to the UK system, while closing loopholes and making the regime clearer and easier to use.

This SI reflects the Government’s determination to ensure that regulations strike the right balance between managing risk and enabling growth, as set out in the modern industrial strategy and the regulation action plan published last year. These changes are part of a broader push under the economic crime plan 2023 to 2026 to build a more effective system that turns the tide on dirty money, including major changes that the Government are making to improve our anti-money laundering supervision regime.

Progress is already being made. In the year ending December 2025, there were 8,486 prosecutions for money laundering as a principal or non-principal offence, a 19% increase compared with the previous year. In the year ending March 2025, £285 million of criminal assets were recovered, a 15% rise compared with the previous year, with £47 million in compensation paid to victims out of confiscation order receipts—a six-year high.

I am aware that the Secondary Legislation Scrutiny Committee raised concerns about the timeliness of this legislation in its 57th report. I am grateful to the committee for its input. However, it is important to recognise the complex nature of some of the measures in the SI. Following the public consultation, further technical discussions with industry and anti-money laundering supervisors were necessary on a number of measures, including in relation to bank insolvency, pooled client accounts and crypto assets. I know the Committee will appreciate the importance of getting the drafting right first time to avoid unintended consequences.

This SI consists of measures on four core themes: making customer due diligence more proportionate and effective; strengthening system co-ordination; closing gaps in coverage; and reforming registration requirements for the trust registration service. There are also additional minor and technical changes that serve to improve consistency and ensure the UK complies with the standards set by the Financial Action Task Force, the global standard setter on anti-money laundering.

I turn first to the measures on customer due diligence. These aim to ensure the checks required on customers are proportionate to the risks. This includes the removal of the requirement for regulated businesses to apply enhanced due diligence checks on countries listed by the Financial Action Task Force as jurisdictions under increased monitoring. These are countries found by the FATF to have strategic deficiencies in their regimes. The FATF does not require these checks, and permitting more flexibility here recognises that being linked to a listed jurisdiction does not automatically make a customer high risk. The Government estimate that this change alone will generate savings of £178 million per year for regulated firms, which can then be reinvested in higher-value compliance activity that identifies genuinely suspicious activity. Other changes on customer due diligence include important measures to increase the availability of pooled client accounts for businesses with a legitimate need, and to facilitate continued access to banking services for customers in the event of a banking insolvency.

I turn to the system co-ordination. The SI makes changes to strengthen co-operation and information-sharing between anti-money laundering supervisors and other public bodies such as Companies House, which plays an increasingly integral role in the UK’s defences against illicit finance. To close gaps in coverage, the SI brings the activity of selling off-the-shelf firms within the scope of regulated activities. The SI also makes changes to ensure owners of crypto asset firms do not escape fit and proper checks by the Financial Conduct Authority.

I turn finally to the trust registration service. The SI makes a number of changes to close loopholes that could be leveraged to obscure asset ownership, improve transparency of beneficial ownership of trusts with significant UK connections and refine registration requirements for other types of trust.

The implementation of these measures will be swift, with the majority of measures coming into force 21 days after the SI is made. There are limited exceptions to this, such as for the measures on crypto assets, where a longer implementation period is necessary to give regulated businesses sufficient time both to adjust their systems and processes and to align with the introduction of the new financial services regulatory regime for crypto assets, which will come into force in October 2027. Safeguards have been built into the SI to mitigate risks in the interim period.

In conclusion, these regulations strengthen the UK’s defences against illicit finance by better targeting high-risk activity and closing loopholes in the regime. I beg to move.

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I close by returning to the central point. These regulations are welcome in so far as they reduce unnecessary compliance burdens and make targeted improvements to the existing framework, but they do not answer the wider question. The fight against money laundering and terrorist financing is vital but, if the system designed to prevent financial crime ends up driving out of our banking system charities, lawful individuals and small businesses—I know people running small businesses who are certainly not engaged in financial crime but have run into trouble in setting up accounts—it is not working as well as it should. I hope that the changes will ameliorate matters but I urge the Government not only to proceed with the sensible elements of the regulations before us but to look again at the wider regime, including its costs, its complexity, its unintended consequences, its enforcement and its impact on ordinary customers and businesses.

[Lord Wilson of Sedgefield (Lab)]

My Lords, I thank the noble Baronesses for their questions. They were many in number so we will scour Hansard and, if there are any that I do not answer, we will of course respond with letters.

I turn first to the points made by the noble Baroness, Lady Bennett; I hope to cover them all, though not necessarily in the order in which she made them. She mentioned enhanced due diligence as far as high-risk jurisdictions, especially the likes of Russia and China, are concerned. The money laundering regulations contain specific provisions requiring enhanced due diligence in relation to geographic risk, which are unchanged by this SI. Firms must still assess and manage geographic risk as part of their overall risk-based approach and apply EDD wherever high risk is identified, in line with the requirements set out in the regulations. Firms will be expected to consult government guidance, such as the National Risk Assessment of Money Laundering and Terrorist Financing 2025, which provides a more UK-focused, nuanced and sector-specific view of the risks. Jurisdictions that present a risk in the UK but are not currently listed by the Financial Action Task Force, such as Russia, China and the UAE, are referred to in the national risk assessment for the UK.

On the changes to the due diligence requirements, some countries on the FATF’s increased monitoring list are recognised as presenting more of a regional risk than an international one, perhaps due to the lack of specialised and international-facing financial sector or strict currency controls. The Financial Action Task Force recommends enhanced due diligence to be mandatory only for countries on the separate “call for action” list, which will continue to be the case following this change.

The noble Baroness asked a question on asset recovery. The 2026-29 ECP will set out the Government’s next whole-system approach to tackling economic crime. It will consolidate key strategies, including the fraud and anti-corruption strategies and the forthcoming anti-money laundering and asset recovery strategy, into a single coherent framework for delivery. The plan will focus on strengthening cross-system prioritisation and deliver grip and the long-term funding and capabilities needed to respond to evolving economic crime threats.

On reforms to the trust registration service, the Government are making targeted changes to particular categories of trusts to ensure that requirements to register remain proportionate to the risk. Recognising that registration must be proportionate to risk, certain types of trusts are excluded from the requirement to register on the grounds that they either pose an inherently low risk of money laundering or are already regulated elsewhere.

On the database for trust registration, trusts are frequently established for legitimate and highly personal reasons, such as to hold assets for children or vulnerable adults. The Government believe that placing the information held on the trust register into the public domain would infringe the privacy rights of individual beneficial owners, the vast majority of whom are not involved in any money laundering activities. The information held on the register is available on request to law enforcement agencies and other relevant parties to assist with anti-money laundering investigations. The Government believe that this approach strikes the right balance between the conflicting demands of transparency and privacy.

The noble Baroness, Lady Bennett, made a point about stamp duty reserve tax. In taking a risk-based approach, the Government consider that the role of stamp duty reserve tax in enabling and detecting money laundering or terrorist financing is not proportionate to the administration placed on trusts by this requirement. The current regulatory framework focuses on those entities with significant links to the UK. The Government consider that a liability to stamp duty reserve tax is not, in isolation, indicative of a significant link to the UK. Entities with significant links to the UK are more likely to be those with significant property assets or liabilities for income, capital gains and inheritance tax. The collection of stamp duty reserve tax is already administered by the Government, and the sale of shares already sits within a broader regulatory environment.

I welcome the approval of the general thrust of the SI from the noble Baroness, Lady Neville-Rolfe. She raised several issues that I hope I can answer. The money laundering regulations form a core part of the UK’s defence against economic crime. They aim to ensure that attempts to launder money through banks and other regulatory businesses are prevented or detected and flagged to law enforcement. The SI is part of a wider suite of government action on money laundering and economic crime in general. This includes the publication of the National Risk Assessment of Money Laundering and Terrorist Financing 2025 in July 2025, the delivery of two economic crime plans—2019-22 and 2023-26—with a further economic crime plan in the pipeline, the new anti-corruption strategy in December 2025, the new fraud strategy in March 2026 and anti-money laundering supervision reform.

At Budget 2025, the economic crime levy, which is paid by businesses regulated under the money laundering regulations, was raised to generate an additional £110 million for initiatives to tackle economic crime. In my opening speech, I mentioned some of the benefits from what we have achieved and are going on to achieve. The Government have committed to recruit 475 new roles by September 2026 to help clamp down on money laundering; £284.5 million of criminal assets were recovered in the year to March 2025; and there have been nearly 8,500 prosecutions and 3,892 convictions for money laundering as a principal and non-principal offence. This is a big increase, of nearly 20%, from before.

On refusal to open bank accounts, the FCA requires banks to treat customers and prospective customers fairly, to take proportionate and non-discriminatory account opening decisions and to apply the consumer duty across the full onboarding journey. Where someone is dissatisfied with how a decision has been handled, they can complain to the firm and escalate the matter to the Financial Ombudsman Service, which can assess whether the firm has acted fairly. In addition, where an individual is denied access to a standard current account, the UK’s nine largest personal current account providers are legally required to offer basic bank accounts.

I turn to derisking and bank account closure. Economic crime, including money laundering, poses a rapidly growing and increasingly complex threat to the UK’s national security and prosperity. It fuels the serious organised crime that damages the fabric of society. In the face of this threat, the Government believe that due diligence checks, applied proportionately, are an essential tool to protect firms and their customers from fraud and other financial crime, as well as assisting law enforcement in investigating criminal activity.

On the SRA and sanctions, the original consultation received hundreds of responses. The legal sector, as the noble Baroness pointed out, expressed some concerns, but changes made following the technical consultation are expected to address most of those. Financial services and most other sectors have welcomed the shift away from tick-box compliance, particularly the reforms to increase flexibility around enhanced due diligence. Civil society and anti-corruption organisations supported the measures to close loopholes and improve system co-ordination, while expressing measured concern about EDD changes. A recent blog by Spotlight on Corruption stated that most of the measures in the SI were “unambiguously positive”.

On debanking, banking services fulfil a vital role for millions of people. The Government have legislated to ensure customer protection in cases where their bank account is terminated by the provider. Payment service providers are required to give customers at least 90 days’ notice before closing their account under new rules which came into force in April 2026. Providers will also need to provide a clear explanation to customers in writing so that they are able to challenge decisions, such as through the Financial Ombudsman Service.

I turn to the difficulties facing SMEs in accessing a bank account. Access to banking services is obviously vital and the Government have introduced new rules to require banks to give customers 90 days’ notice. These new rules will ensure more transparent and predictable access to banking, and the Government will continue to monitor wider access to bank account provision.

On the difficulties facing charities in accessing a bank account, charities and community groups make a valuable contribution to society. UK Finance, banks and charity representative groups have worked together to provide the voluntary organisation banking guide, aimed at supporting charities and community groups to access banking services. We will continue to monitor wider access to bank account provision while recognising that it is largely a commercial matter.

The noble Baroness mentioned defence companies and their access to bank accounts. Access to finance is a significant issue for defence firms, particularly SMEs. No company should ever be denied access to financial services solely on the basis of its work in the defence sector. The banking sector should never take a blanket approach to any one sector. The Government are actively engaging with banks to ensure that they understand the importance of the defence sector. The FCA has worked to understand why banks might close or reject accounts. Where it has found areas where firms need to improve customer outcomes, the Government expect firms to consider its findings.

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[Baroness Bennett of Manor Castle (GP)]

I have just been musing on something that the noble Lord said that I think I wrote down correctly: namely, that stamp duty reserve tax liability does not indicate a significant link to the UK. We need to consider that statement in the context of how much UK infrastructure and its essential services have been privatised. I am thinking of water companies and infrastructure construction: indeed, large-scale defence companies in foreign ownership. I will understand if the Minister wants to write to me. I am not necessarily asking for a direct answer now, but what provisions do the Government have to make sure that this weakening of the regulation does not open up the ownership of some of those things that in the current geopolitical climate are of grave concern from a security aspect?

[Lord Wilson of Sedgefield (Lab)]

First, this is not a weakening of the regulation but a balanced approach that we take in this whole area. I will set out the arguments in greater form for the noble Baroness and write to her with the specifics.

[Baroness Neville-Rolfe (Con)]

I come back to the issue of debanking. The Minister said some very useful things. This is debanking. We talked about defence companies and I look forward to hearing the results of that active engagement. I have talked in the APPG to individual defence companies that have had difficulties in this respect and we need to be supporting our defence companies, especially the innovative ones, given the change in the nature of weapons and so on at this difficult time.

The banks are required to offer basic banking and give 90 days’ notice if they want to close an account. When you are given notice of the closing of an account, you then have to go to another bank and go through the whole system of being approved by it. I have tried to set up a new bank account at Metro to complement my account with one of the major four banks. Frankly, I gave up. Once you are in the system, it is absolutely fine. My bank knows about me: I have been banking there for years. But, if you try to go to a new bank, it is quite complicated: a lot of questions are asked and you give up.

This all links to what the Minister is trying to do, which is to make it easier for citizens who do not necessarily have a good credit record to have a bank account, because it is important for them to be able to operate an account, save, have a card and so on. I wanted to emphasise that point and say that the Government’s work is important. If more progress is made in that area, I should be very interested to hear about it.

[Lord Wilson of Sedgefield (Lab)]

In response to the noble Baroness, there is the 90 days’ notice and the access to basic bank accounts, et cetera. There is ongoing work in this area. I can write to her and let her know exactly where we are up to in all of this, so she will have some awareness of where the Government intend to go.

Motion agreed.