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FSA scrubs laundering rules

The FSA says its consultation last year found “overwhelming support” for the
changes to its anti-money laundering rules (AML), which take effect from the
start of March. The new high-level principles require firms to have their own
risk-based controls on money laundering.

The FSA said that the change to its handbook does not mean it is going soft
on money laundering, but should enable firms to target their resources more
effectively. “Rather than just complying with the FSA rules, it gets firms to
think about what their risks are and that they have controls to deal with those
risks,” says an FSA spokesperson.

In line with the FSA’s move, new risk-based guidance has been developed by
the Joint Money Laundering Steering Group (JMLSG). This allows firms to focus
resources on customers who represent a higher risk.

The ICAEW believes the change is “a welcome move”, removing the need for
firms to comply with detailed FSA rules and JMLSG guidance. “The structure has
been simplified and made more coherent,” says Felicity Banks, the institute’s
head of business law. “That should make it easier for directors.” However, the
change could be interpreted as a tightening of the requirements, because it
clarifies that directors have the ultimate responsibility for firms’ AML

“The prospect of the new regime may create uncertainty for AML strategy
between the role of senior management and the money laundering reporting officer
(MLRO),” said Louise Delahunty, from law firm Peters & Peters. “The new FSA
and JMLSG guidance place a dual emphasis on the importance of senior management
responsibility and the role of the MLRO. The potential blurring of the
boundaries may create uncertainty about liability if an offence is committed.”

The principles-based approach won’t necessarily make life easier for firms, as
they may need to take more care over how they develop AML controls and document
that process. “The focus away from prescriptive AML requirements towards a more
principles-based approach has created concern,” Delahunty says. “Firms will
employ the risk-based approach in devising their policies, but should ensure
that all strategy and decisions are fully documented.”

Firms have until August to become fully compliant with the new regime.

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