DRAFT MONEY LAUNDERING AND TERRORIST FINANCING (AMENDMENT) REGULATIONS 2022

John Baron Excerpts

Monday 7th February 2022 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2022.

It is a pleasure to serve under your chairship, Mr Robertson. The Government recognise the threat that economic crime poses to the UK, and are committed to combating money laundering and terrorist financing. Illicit finance not only risks damaging our reputation as a fair and open economy, but poses a threat to our national security by undermining the integrity and stability of our financial markets and institutions. Illicit finance also has significant social and economic costs through its links to serious and organised crime, and can reduce opportunities for legitimate business in the United Kingdom. That is why the Government are focused on making the UK a hostile environment for illicit finance.

We have taken significant action to tackle money laundering and terrorist financing and to strengthen the response of the whole financial system to economic crime. Front and centre to those efforts are the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—the money laundering regulations—which are a key part of our legislative framework, and set out a number of measures with which businesses and trusts must comply to make the UK an inhospitable place for money laundering and terrorist financing. Those measures include the requirement for trusts to register with Her Majesty’s Revenue and Customs’ trust registration service. Trusts are an integral feature of the UK’s legal system and are used for a wide range of legitimate purposes. However, they can also be used to conceal the true beneficial ownership of assets, and therefore to impede law enforcement as it investigates money laundering and terrorist financing.

The trust registration service addresses that risk by providing law enforcement with a key source of up-to-date information on the beneficial ownership of assets held in trusts. As a result of changes introduced in 2020, the trust registration service has been expanded so that most types of UK express trusts are now required to register. In addition, overseas trusts with certain connections to the UK, including the acquisition of land or property in the UK, are now for the first time required to register. Today’s statutory instrument amends the money laundering regulations to ensure that the trust registration service operates as effectively as possible as an anti-money laundering tool, striking the right balance between the public interest of tackling money laundering and the right to privacy of those who use trusts for legitimate purposes.

First, to ensure that trustees have sufficient time to gather the necessary information and complete the registration process, the instrument extends the registration deadline for those types of trusts newly required to register until 1 September 2022. Secondly, the instrument extends the time limits for reporting changes to the information held on the register. Trustees are required to update the register within certain time limits, if the information held on the register relating to the individuals involved in the trust changes. In recognition of the fact that such changes are often triggered by traumatic life events—for example, bereavements—the instrument extends the time limit so that trustees will have 90 days to report such changes to HMRC. Lastly, the instrument makes changes to the categories of trusts that are excluded from registration. Certain types of trusts that pose an inherently low risk of money laundering are excluded from registration.

[Mr John Baron (Basildon and Billericay) (Con)]

The Government are right to clamp down on money laundering and to ensure, courtesy of the draft regulations, that the rules are not too onerous, but will the Minister, when he has two minutes, look at some of the questionnaires being sent out by banks seeking additional financial information, and apparently citing the Government’s introduction of onerous regulations as the source of the problem? Constituents have reported to me that some of the questionnaires ask for quite a lot of detail regarding their financial affairs.

[John Glen]

I thank my hon. Friend for that intervention. I am aware of the tension regarding the application of rules designed to keep our banking system both clean and accessible. It has come to my attention in a number of ways over recent weeks and months, and in particular the issue of accounts being difficult to set up for charities and small community organisations. I intend to convene a roundtable with the banks to examine the issue and ensure that the interpretation of these legitimate restraints against abuse does not impede access to banking for our constituents.

This instrument just makes some small changes to the existing categories of excluded trusts to ensure that the burden of registration is proportionate to the money laundering risk that certain types of trust pose. I thank Committee members for their examination of this important piece of legislation. In summary, the instrument will amend the money laundering regulations as they relate to trust registration to ensure that the regulations strike an appropriate balance between providing an effective anti-money laundering tool for law enforcement and minimising the administrative burden on those who use trusts for legitimate purposes. This amendment will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system and allow the UK to continue to play a leading role in the fight against economic crime. I hope colleagues will join me in supporting this legislation.