UK tightens reins on money laundering

By Tim Castle and Clara Ferreira-Marques

London - Britain plans to tighten its controls on money-laundering, monitoring thousands more businesses and keeping a closer eye on the funds of foreign officials and politicians, the government said on Monday.

The tougher regulations will affect more than
200 000 firms across the financial, accounting and legal sectors, as well as estate agents, insurance brokers and casinos.

Speaking to a financial crime conference, Economic Secretary Ed Balls said the proposals, published for consultation on Monday, would also reduce the regulatory burden in areas considered to carry a low risk, like Child Trust Funds or pension funds where contributions are made only by the employer.

"By taking tough and targeted new measures where the risks are greatest we will crack down further on illegal activity and help force criminals and would-be terrorists out of the shadows," Balls told the conference.

The proposed rules will implement the European Union's Third Money Laundering Directive. Britain has to bring the rules into law by December 2007 as EU states harmonise their money laundering and anti-terrorism financing legislation from their current patchwork of inconsistent regulations.

The directive will for the first time require banks and others to investigate the finances of foreign politicians, public officials and their families, to ensure their wealth has been legally obtained.

Due diligence checks will have to be made on these "politically exposed persons" in an effort to crack down on overseas corruption.

Casinos will be required to choose between checking the financial probity of gamblers either as they enter premises or when their gambling reaches 2 000 euros - around 1 300 pounds.

This is stricter than the 3 000 euros threshold recommended by the Financial Action Task Force, an intergovernmental anti-money-laundering body. Britain takes over the presidency of the FATF later in 2007.

The consultation on the proposals runs to April 2, with the rules then expected to be put to parliament by the summer.

The Financial Services Authority, whose role as a watchdog includes tackling money laundering and market abuse, added on Monday that it planned a new Financial Crime and Intelligence unit to target its efforts more efficiently.

Currently, responsibility is spread across its divisions.

John Tiner, the FSA's outgoing chief executive, told the conference the new unit would also work on ways of measuring financial crime and money laundering.

He said the division would also look closely at personal financial data, now held by a growing number of non-financial firms, but also at offshore issues, at data lost through careless disposal by firms' employees and at the risk of theft from marketing practices like unsolicited credit card cheques.

Keeping records of customer identity, transactions and other money laundering checks is expensive, costing Britain's financial services industry around 250-million pounds a year, an FSA report said in June 2006.

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