Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the impact on UK companies of the registration thresholds resulting from the implementation in the UK by the Financial Conduct Authority of the EU’s 5th anti-money laundering directive; and what assessment have they made of whether the directive is leading to UK companies’ tax revenues being driven offshore.

The UK’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), set out the high-level requirements on regulated entities to combat money laundering.

When the EU’s 5^th Anti-Money Laundering Directive (5MLD) was introduced in May 2018, the UK was required to transpose the requirements of 5MLD into domestic legislation, which included the expansion of the scope of the regulated sector. The UK completed the transposition of 5MLD in October 2020.

The MLRs are designed to detect and prevent money laundering and terrorist financing before it occurs, both directly through the UK’s financial institutions and through enablers who may be involved in transactions such as lawyers, accountants and estate agents. 5MLD expanded the threshold for firms and sole practitioners who are regulated under the MLRs, and therefore required to register for anti-money laundering supervision, to include: letting agents, art market participants, cryptoasset firms, and tax providers. The government consulted in 2019 on how best to include these sectors within the UK’s anti-money laundering and counter-terrorist financing regime, seeking to ensure that the regime effectively deters money laundering and terrorist financing activity, whilst being proportionate and managing burdens on businesses and legitimate customers.

The UK is a global leader in the push towards greater tax transparency, driving forwards cooperation between jurisdictions to help to tackle tax evasion by making it harder to hide offshore financial assets. HMRC has a strong record in tackling offshore non-compliance, whether stopping this through leading international activity, providing easy ways for people to disclose correctly their tax affairs, or by acting against those who are trying to deliberately cheat the public.