Anti-money laundering

In 2021 we predict

2 Criminal prosecutions by the FCA for money laundering offences.

The picture in 2020

The impact of COVID-19

• The new operating environment – with increased crime, compliance challenges and financial volatility – has raised ML risks, as well as operational challenges for regulators.
• Closer public/private cooperation has helped fill the gap to a degree.

Crypto-assets

• 5MLD was transposed into UK law in January, bringing new sectors, notably crypto-businesses, within the scope of the MLRs.
• Crypto-businesses were required to apply for registration with the FCA by 30 June 2020.
• The JMLSG has published new sectoral guidance on crypto-assets.

Suspicious activity reporting

• Reporting continues to rise: SARs up 20% (to 573,085); DAMLs up 81% (to 62,408).
• Response times are down from 5.12 to 4.18 days – indicating that investment in the UKFIU may be starting to pay off.
• The FinCEN Files leak of 2,100 SARs has raised concerns for financial institutions and regulators.

Account freezing & unexplained wealth orders

• £208m frozen using AFOs; £69m collected through forfeitures – a record high.
• Mixed success in the courts, including the first successful challenge of a UWO (NCA v Baker).

Looking ahead to 2021

• COVID-related risks will continue to be a major focus for regulators and businesses.
• Brexit is likely to bring its own enforcement challenges, but no significant legislative changes in the short-term.
• Crypto-businesses will be an area of focus for the FCA, and 2021 could see the first use of the FCA’s criminal powers for breaches of the MLRs.
• We expect to see increasing, yet cautious, deployment of AFOs and UWOs.
• The Government is due to respond to proposals to reform the SARs regime, and the UK companies register, and to introduce a new economic crime levy.

What does this mean?

We expect 2021 to be a year of adjustment for regulators and business, as new market-related risks (including COVID, Brexit and the growth of crypto-assets) continue to develop. AML enforcement activity should rise overall and may have more ‘teeth’ (e.g. higher fines and the deployment of the FCA’s criminal powers). Significant legislative reform is also on the agenda, even if full implementation may be delayed beyond 2021.