## _cr16165

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---

### Executive summary and introduction
- Purpose: Technical Note (TN) summarizing findings and recommendations from the 2016 Financial Sector Assessment Program (FSAP) for the United Kingdom (U.K.) in Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
- Scope:
  - Targeted review of U.K. progress addressing vulnerabilities in the banking sector and enhancing transparency of legal entities and arrangements.
  - Factual update on measures since the U.K.’s 2006 assessment against the Financial Action Task Force (FATF) standard.
  - Not an assessment against the revised FATF standard (U.K. scheduled for mid-2018 assessment).

### Progress since the 2006 assessment — compliance with international standards
- 2007 Mutual Evaluation Report (MER) key findings:
  - AML/CFT legal framework and criminalization of ML and TF offenses: comprehensive.
  - Adequate powers to freeze, seize and confiscate proceeds of crime and terrorist-related assets.
  - U.K. Financial Intelligence Unit (FIU) effective.
  - Shortcomings: certain customer due diligence (CDD) requirements did not require identification of beneficial owners of accounts; shortcomings in supervision of real estate and company service providers.
  - Deficiencies identified in supervision/enforcement and in transparency of legal persons and arrangements (including risks from bearer shares).
- Actions taken since 2007:
  - Adoption of Money Laundering Regulations (MLRs) in 2007 (implementing in part 3AMLD).
  - Removed from FATF regular follow-up process in October 2009.
  - Establishment of National Crime Agency (NCA) in 2013 with Economic Crime Command (ECC).
  - Reforms to suspicious activity report (SAR) regime; publication of ML/TF National Risk Assessment (NRA).
  - Transposition in progress of Fourth EU AML Directive (4AMLD); establishment of People with Significant Control (PSC) register (coming into force April 2016); abolition of bearer shares and corporate directors.

### National Risk Assessment (NRA) — key findings and intelligence gaps
- Objectives: identify, assess, and understand ML/TF risks; take stock of collective knowledge; identify intelligence gaps; assess effectiveness of AML/CFT regime.
- Proceed-generating crimes and scale:
  - Fraud and tax offenses identified as main proceed-generating crimes.
  - Tax gap related to tax crimes and evasion in 2012/13 estimated at almost GBP 10 billion.
  - Narcotics trafficking market value estimated at approximately GBP 4 billion per year.
  - HM Government estimate: serious and organized crime annual social and economic cost of GBP 24 billion.
  - Some non-governmental organizations estimate that between GBP 2,357 billion is laundered within and through the U.K. each year.
  - NCA assesses that hundreds of billions of U.S. dollars of criminal money almost certainly continue to be laundered through U.K. banks, including their subsidiaries, each year.
- Intelligence gaps and vulnerabilities:
  - Better understanding of cash-based ML; significant intelligence gaps for “high-end” ML through financial and professional services.
  - “High-end” ML sources: major fraud and serious corruption, notably overseas corruption; corruption believed to result in billions of pounds of suspected proceeds laundered through the country each year.
  - Need to better understand proceeds held in bank accounts, real estate and other investments, and vulnerabilities in financial and professional services sectors.
- Supervisory vulnerabilities:
  - Inconsistencies in supervision identified as source of vulnerability.
  - U.K. supervisory regime comprises 27 supervisors (public sector organizations and professional bodies).
  - Use of professional bodies as supervisors may give rise to potential conflicts of interest and incentives for regulatory arbitrage.
- Terrorist financing (TF):
  - TF significant threat; part of U.K.’s “CONTEST” strategy since 2011.
  - Sectors most vulnerable: MSB sector and cash couriers.
  - NPO and banking sectors: medium-high and medium TF risks, respectively.
  - There have been 17 convictions for TF-related offenses between September 2001 and June 2014.

### AML/CFT measures in the banking sector — findings and supervisory assessment
- Systemic context and scale:
  - Banking sector identified as most vulnerable channel to ML in the U.K. due to size, complexity, product range, transaction volumes, and international interconnectedness.
  - U.K. was highest-ranked country in terms of both interconnectedness and composite rank in IMF assessment of strategically important financial sectors.
  - U.K. banking sector on a residency basis and relative to GDP: around 450 percent in 2013 compared to 100 percent in 1975.
  - Foreign banks constitute around half of U.K. banking sector assets on a residency basis.
  - Nearly a fifth of global banking activity is booked in the U.K.
- Common deficiencies observed by the FCA since 2012:
  - Inadequate governance and oversight of ML risk.
  - Inadequate risk assessment processes to identify high-risk customers; weak handling of PEPs including source of wealth and source of funds.
  - Inadequate due diligence on correspondent banks.
  - Inadequate or poorly calibrated AML/sanctions-related IT systems.
  - Weaknesses in handling alerts relating to sanctions and/or transaction monitoring.
  - Poor judgments or decisions leading firms to take on unacceptable ML risk.
  - Emerging developments to monitor: mobile payments and virtual currencies.
- Supervisory framework and activity:
  - FCA is primary supervisor under FSMA with objective to protect and enhance integrity of U.K. financial system.
  - FCA estimates some 15,000 firms subject to the MLRs, of which 900 are deposit-taking institutions.
  - Systematic AML Program (SAMLP) introduced in 2012 for deep-dive testing across 14 major retail and investment banks; operates on a four-year rolling cycle; on-site SAMLP work lasts around three months.
  - Since August 2012, FCA has conducted approximately 230 on-site AML review visits to banks (including 17 overseas visits) and a further 186 desk-based AML reviews.
  - 2014 supervisory strategy groups regulated firms into risk bands; highest-risk firms subject to extensive SAMLP or regular visit program; lower-risk firms monitored by risk alerts, event-driven supervision, thematic reviews, and desk-based reviews.
  - FCA thematic sample sizes generally around 20–30 firms; thematic reviews conducted since 2012 include trade finance (2013), asset management and platform firms (2013), and How smaller banks manage AML and Sanctions risks (2014).
- Remediation and execution risk:
  - Many banks require significant investment to remediate deficiencies (e.g., replacing legacy systems). Major remedial plans in place; some will take several years and carry significant execution risk.
  - Private banks and wealth management firms generally performing better on AML issues than retail and wholesale banks.
- Enforcement and penalties:
  - New penalties regime introduced in 2010.
  - Since 2012, FCA has taken formal enforcement action against nine firms and individuals for AML failings, with fines totaling approximately GBP 96 million (USD 140 million).
    - Includes a fine of GBP 72.1 million imposed in 2015 and GBP 7.6 million imposed in January 2014.
    - January 2014: GBP 7.6 million fine on a global bank for AML failings relating to corporate customers connected to PEPs.
    - November 2015: GBP 72.1 million fine on a global bank for failure regarding customers that are PEPs.
  - FCA applies a risk-based approach to enforcement case selection aiming for “credible deterrence.”
  - FCA notes financial penalties are not the only deterrent: uses formal remedial plans, restricting higher-risk business until weaknesses are remedied, and seeking formal attestations from senior management.
- Outstanding supervisory questions and recommendations (banking sector):
  - AML/CFT supervisory framework for higher-risk banks appears adequate, but adequacy across entire banking range remains to be determined as the strategy has only recently been implemented.
  - The backstop for ensuring lower-risk firms effectively manage ML risks appears limited.
  - Recommendations:
    - Determine whether supervisory attention to banks in the lowest-risk categories is sufficient to ensure effective assessment and management of risks. — Medium term
    - Determine whether more cases should be referred for enforcement as a result of AML specialist supervision work, particularly the thematic review of smaller banks’ AML and sanctions controls. — Medium term

### Transparency of legal persons and arrangements — risks, reforms, and gaps
- Corporate landscape and registration statistics:
  - Common legal persons and arrangements: companies, partnerships, and trusts.
  - As of November 2015: companies and LLPs registered with Companies House amount to over 3.6 million and 59,000, respectively.
    - Increase of almost 30 percent for companies and around 18 percent for LLPs since November 2011.
  - LPs increased by over 72 percent since 2010/11, reaching 32.398 in 2014/15.
  - SLPs have more than doubled in the same time-period.
  - Conservative estimates: number of express trusts formed in the U.K. between 1.5 to 2 million.
- ML risks from legal persons and arrangements:
  - Legal persons and arrangements can facilitate movement of large sums without attracting same attention as natural persons; complex corporate structures can obfuscate beneficial ownership and transaction purpose.
  - NRA highlighted vulnerable corporate structures: “shell” companies, “off the shelf” companies, “dormant” companies; misuse of offshore companies and trusts cited in cases.
  - Partnerships (LPs and SLPs) deemed less transparent due to lighter reporting obligations and shielding under the 1985 Companies Act.
  - Mechanisms that conceal ownership/control:
    - Bearer shares: ownership passes with certificate; holders do not appear on shareholder register.
    - Corporate director: a legal person acting as director.
    - Nominee director: non-executive director acting on behalf of another natural or legal person exercising effective control.
  - “High-end” ML commonly facilitated through legal persons/arrangements (laundering proceeds of large-scale fraud and serious corruption through financial, real estate, and professional services sectors).
    - Transparency International (TI) report: over 75 percent of properties in the U.K. under investigation by Metropolitan Police’s POCU are owned through a company incorporated in a “secrecy jurisdiction.”
    - Among companies holding properties under POCU investigation, 79 percent are incorporated in a Crown Dependency (CD) or Overseas Territory (OT): specifically 49 percent in Jersey, 15 percent in the Isle of Man, 10 percent in the BVI and 5 percent in Gibraltar.
- Sources of information available to law enforcement:
  - Companies House central register; filings with HMRC; regulated entities subject to AML/CFT obligations (financial institutions and DNFBPs); and information kept with the legal person or arrangement itself.
  - Companies House responsibilities: incorporate/dissolve limited companies, register required information, make it publicly available. Jersey, Guernsey and the Isle of Man excluded from U.K. Companies Register.
  - Top three legal entity types at Companies House: private limited companies, LLPs, and LPs — together 99 percent of registered entity types; private limited companies over 96 percent alone.
- Deficiencies in beneficial ownership transparency:
  - 2006 evaluation found lack of adequate, timely and accurate beneficial ownership information; law enforcement hindered in tackling ML and asset recovery where beneficial ownership could not be obtained.
  - No central register for express trusts; trustees may need to register with HMRC for tax purposes; trustees have common law obligation to hold trust information.
- Legislative reforms and PSC register:
  - G-8 Action Plan (July 2013) committed companies and trustees of express trusts to obtain and hold adequate, accurate, and current beneficial ownership information and ensure competent authorities’ access.
  - Small Business, Enterprise and Employment Act (SBEE Act) (2015) includes:
    - Establishment of register of people with significant control (PSC).
    - Abolition of bearer shares (no bearer shares may be issued effective May 2015; existing bearer shares must be surrendered by February 2016).
    - Prohibition of appointment of corporate directors subject to exceptions; simplification replacing annual return with confirmation statement; strengthening fit-and-proper requirements for directors.
  - PSC register specifics:
    - Companies required to start holding PSC register as of April 6, 2016, and file this information with Companies House from June 30, 2016. PSC regime scope includes LLPs and SEs.
    - “Significant control” defined by one (or more) of five conditions (e.g., holding more than 25 percent of shares or voting rights; right to appoint/remove majority of board; significant influence; significant control over a trust or firm).
    - PSC is by definition a natural person, but legal persons can be entered where relevant and registrable under SBEE Act.
  - Limitations relative to 4AMLD:
    - PSC register scope falls short of 4AMLD central register of all corporate and legal entities.
    - U.K. will need to include SLPs under PSC register, as these have separate legal personality.
    - 4AMLD requires information held in central register to be current.
- Nominee directors, bearer shares, and trusts:
  - Abolition of bearer shares expected to enhance transparency (no issuance effective May 2015; surrender by February 2016).
  - Authorities reviewed nominee directors and opted for enhanced communication on directors’ obligations, early intervention and tightened enforcement of statutory duties; report encourages revisiting possibility of a register of nominee directors or their principals, notably for TCSPs acting as nominee directors.
  - 4AMLD requirements for express trusts:
    - Trustees must obtain and hold adequate, accurate, and up-to-date information on beneficial ownership, including identity of beneficiaries and any natural person exercising effective control.
    - Trustees must disclose status and provide beneficial ownership information when engaging with regulated entities.
    - Countries must set up central register of beneficial ownership of express trusts where these give rise to tax liability.
- Trust or Company Service Providers (TCSPs):
  - TCSP services include forming companies/other legal persons; acting or arranging for another to act as director, partner, or trustee; providing registered office, business address, correspondence or administrative address; acting or arranging for another to act as nominee shareholder.
  - About three quarters of overall new companies in 2012/13 were incorporated through a third party.
  - TCSPs fall within regulated sectors under 2007 MLRs; required to conduct CDD, keep records, and report suspicious activity. CDD obligations include identifying/verifying customer identity and beneficial owner; measures applicable when establishing business relationship, occasional transactions amounting to €15,000 or more, on suspicion, or where there is doubt about information veracity. TCSPs must comply with fit-and-proper requirements.
  - Supervision of TCSPs fragmented across multiple supervisory bodies (default supervisor HMRC), resulting in inconsistent monitoring and enforcement; total number of registered TCSPs at time of NRA unknown.
  - Reporting by TCSPs and related sectors low relative to identified risks: accountancy and legal service providers rated high structural and overall risk; TCSPs rated medium. SARs from these sectors represented less than 3 percent of all SARs received between October 2013 and September 2014; TCSP sector reported 0.05 percent of total (177 SARs).
- Recommended actions on legal persons and arrangements:
  - Adopt a risk-based approach to preventing misuse of legal persons and arrangements as understanding of “high-end” ML deepens and intelligence gaps are addressed. — Medium term
  - Consider measures to enhance transparency of foreign legal entities and arrangements; as a first step consider bringing foreign companies required to register with Companies House within scope of PSC register. — Medium term
  - Impose disclosure requirements on nominee directors, either through a central register or a licensing regime; in particular impose disclosure requirements on TCSPs that act as nominee directors. — Medium term
  - Enhance AML/CFT compliance of TCSP sector and enforce adequate fit-and-proper requirements. — Medium term
  - Enhance transparency of express trusts, notably by transposing 4AMLD so competent authorities have access to adequate, timely and accurate information on beneficial ownership and control of express trusts. — Medium term

### SARs regime, institutions, and information exchange
- Institutional developments:
  - Establishment of NCA in October 2013; NCA’s Economic Crime Command (ECC) combats ML, hosts U.K. FIU and Proceeds of Crime Centre.
  - International Corruption Unit (ICU) established in May 2015 to enhance intelligence and response to overseas bribery and corruption.
- SARs regime:
  - SARs regime identified as a priority due to deficiencies in reporting quality across regulated sectors.
  - DNFBPs accounted for only 2.8 percent of all SARs submitted to the FIU in 2014; banking sector submitted 82 percent.
  - Number of SARs increased approximately 12 percent from 2013 to 2014, reaching 354,186 SARs in total.
  - Shortcomings in “consent requests” under POCA SARs regime noted; potential for defensive reporting and offloading due diligence to FIU.
  - Authorities launched a Call for Information in February 2015 to enhance SARs regime; emphasis should be on improving quality over quantity.
- Information exchange initiatives:
  - Serious and Organised Crime Financial Sector Forum (quarterly) to facilitate collaboration between law enforcement, regulators and financial sector to disrupt serious and organized crime and facilitate asset recovery.
  - Joint Money Laundering Intelligence Taskforce (JMLIT) set up in February 2015 as a 12-month pilot to provide forum for information and intelligence exchange on current and emerging ML and economic crime threats and on detection, prevention and disruption.

### Main recommendations and timing
- General recommendations:
  - Adopt an AML/CFT strategy and action plan in line with NRA findings, addressing intelligence gaps with respect to “high-end” ML. — Near term
  - Reform SARs regime to enhance quality and consistency of reporting across sectors. — Medium term
  - Consider reviewing AML/CFT supervisory model in light of NRA vulnerabilities to address inconsistencies in supervision and enforcement across regulated sectors. — Medium term
  - Transpose 4AMLD, notably by updating the 2007 MLRs. — Medium term
- Banking sector recommendations:
  - Determine over time whether supervisory attention to banks in lowest-risk categories is sufficient to ensure effective risk assessment and management. — Medium term
  - Determine whether more cases should be referred for enforcement as a result of AML specialist supervision work, particularly thematic review of smaller banks’ AML and sanctions controls. — Medium term
- Transparency of legal persons and arrangements recommendations:
  - Adopt risk-based approach to preventing misuse of legal persons and arrangements as understanding of “high-end” ML deepens. — Medium term
  - Consider measures to enhance transparency of foreign legal entities and arrangements. — Medium term
  - Consider imposing disclosure requirements on nominee directors. — Medium term
  - Enhance AML/CFT compliance in TCSP sector. — Medium term
  - Enhance transparency of express trusts, notably by transposing 4AMLD. — Medium term
- Timing definition:
  - “Near term” is within six months; “medium term” is within six to 18 months.

*Prepared by Richard Lalonde and Yasmin Almeida, Legal Department, IMF.*

*Source: Extract from IMF country report content unit _cr16165 (pages 25–30) on U.K. transparency reforms, PSC register, TCSPs, and 4AMLD transposition.*

### EXECUTIVE SUMMARY ___________________________________________________________________________ 5

### EXECUTIVE SUMMARY

### INTRODUCTION
- This Technical Note (TN) sets out the findings and recommendations made in the context of the 2016 Financial Sector Assessment Program (FSAP) for the United Kingdom (U.K.) in the areas of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
- The TN summarizes findings of a targeted review of the U.K.’s progress in addressing vulnerabilities in the banking sector and in enhancing transparency of legal entities and arrangements.
- The TN provides a factual update on key measures taken by the authorities since the U.K.’s previous assessment against the Financial Action Task Force (FATF) standard in 2006.
- This TN is not an evaluation of the U.K. AML/CFT system; the U.K. is scheduled to undergo an assessment against the FATF standard, which was revised in 2012, in mid-2018, the results of which should be made public.

### PROGRESS SINCE THE LAST ASSESSMENT — Compliance with International Standards
- The U.K. was last assessed against the FATF standard in November/December 2006 and a Mutual Evaluation Report (MER) was adopted in June 2007.
- The 2007 assessment found:
  - The AML/CFT legal framework and criminalization of the ML and TF offenses were comprehensive.
  - Authorities had adequate powers to freeze, seize and confiscate proceeds of crime and terrorist-related assets.
  - The U.K. Financial Intelligence Unit (FIU) was effective.
  - Shortcomings existed with certain customer due diligence (CDD) requirements, which did not require identification of beneficial owners of accounts.
  - Shortcomings in supervision of the real estate and company service providers sectors.
- The 2007 MER identified deficiencies in:
  - Supervision and enforcement: supervisory framework adequate for larger firms but not for certain smaller firms, including small banks; number of enforcement actions low relative to the size of the financial sector.
  - Transparency of legal persons and arrangements: inadequate measures to ensure timely access by competent authorities to adequate and accurate beneficial ownership and control information; risks from bearer shares.
- Actions taken since 2007:
  - Adoption of the Money Laundering Regulations (MLRs) in 2007, implementing in part the Third EU Anti-Money Laundering Directive (3AMLD), addressed many CDD shortcomings.
  - The U.K. was removed from the FATF’s regular follow-up process in October 2009.
  - Establishment of the National Crime Agency (NCA) in 2013 with an Economic Crime Command (ECC) to fight money laundering (ML).
  - Steps taken to reform the suspicious activity report (SAR) regime to improve quality and consistency of reporting.
  - Publication of the ML/TF National Risk Assessment (NRA).
  - Transposition in progress of the Fourth EU Anti-Money Laundering Directive (4AMLD), which will extend enhanced due diligence to domestic politically exposed persons (PEPs) and strengthen fit-and-proper requirements for auditors, accountants, legal professionals, and real estate agents.
  - Adoption of reforms to enhance entity transparency: establishment of a register of people with significant control (PSC) coming into force in April 2016 covering companies, limited liability partnerships (LLPs), and Societas Europaea (SEs); abolition of bearer shares and corporate directors.

### AML/CFT MEASURES IN THE BANKING SECTOR — Findings and Assessment
- The banking sector is identified as the channel most vulnerable to ML activity in the U.K., owing to:
  - Its size and complexity.
  - The range of products and services.
  - Transaction volumes.
  - Interconnectedness with the international financial system.
- Financial Conduct Authority (FCA) observations:
  - The FCA continues to see failings in a number of banks, including in relation to the assessment and management of higher-risk business, although authorities see the situation as improving.
  - Many banks, particularly large banks, now appear to recognize AML as requiring senior management attention and a robust message from the top.
- Supervisory framework:
  - The AML/CFT supervisory framework for higher-risk banks appears to be adequate, but its effectiveness across the entire range of banks remains to be determined as the AML/CFT supervisory strategy has only recently been implemented.
  - The FCA is the primary U.K. supervisor charged with combating abuse of financial services and has developed a new supervisory strategy to target firms that present the highest ML risk, irrespective of size.
  - The backstop relied upon to ensure lower-risk firms effectively assess and manage ML risks appears limited at present.
- Enforcement and penalties:
  - Since 2012, the FCA has taken formal enforcement action against nine firms and individuals in response to AML failings, with fines totaling approximately GBP 96 million.
  - There are a number of ongoing enforcement investigations.
  - Since introduction of the new penalties regime in 2010, there have been relatively few instances where banks have been fined for breaches of their AML obligations relative to the size of the banking sector.
  - The FCA has only recently begun to apply higher fines allowed under the new penalties regime.
  - The FCA applies a risk-based approach to enforcement case selection and targets resources to achieve “credible deterrence” in areas of greatest concern.
  - The FCA emphasizes that financial penalties are not the only deterrent and also uses tools such as formal remedial plans, restricting types of higher-risk business until weaknesses are remedied, and seeking formal attestations from senior management.

### TRANSPARENCY OF LEGAL PERSONS AND ARRANGEMENTS — Findings and Reforms
- Recent reforms to enhance entity transparency:
  - Establishment of the People with Significant Control (PSC) register to come into force in April 2016, covering companies, LLPs, and SEs.
  - Abolition of bearer shares and corporate directors.
- Expected enhancements from 4AMLD transposition:
  - Further enhance access to beneficial ownership information with respect to express trusts and other corporate entities, such as Scottish limited partnerships (SLPs) which have legal personality.
- Areas requiring further action:
  - Consider adopting disclosure requirements for nominee directors.
  - Enhance transparency of foreign legal entities and arrangements that conduct business in the U.K.
  - Strengthen effective implementation of AML/CFT controls in the trust or company service provider (TCSP) sector.
- Overall recommendation:
  - While reforms attest to authorities’ commitment, further efforts are needed to safeguard against misuse of the U.K.’s corporate landscape.

### MAIN RECOMMENDATIONS FOR AML/CFT (Table 1)
- General
  - Adopt an AML/CFT strategy and action plan in line with the findings of the NRA, which would notably address the intelligence gaps identified with respect to “high-end” ML. — Near term
  - Reform the SARs regime to enhance the quality and consistency of reporting across sectors. — Medium term
  - Consider reviewing the AML/CFT supervisory model in light of the vulnerabilities identified in the NRA, in particular to address inconsistencies in supervision and enforcement of AML/CFT obligations across regulated sectors. — Medium term
  - Transpose the 4AMLD, notably by updating the 2007 MLRs. — Medium term
- Banking Sector
  - Determine over time whether the supervisory attention given to banks in the lowest-risk categories is sufficient to ensure they are effectively assessing and managing their risks. — Medium term
  - Determine whether more cases should be referred for enforcement as a result of its AML specialist supervision work, in particular, its thematic review of smaller banks’ AML and sanctions controls. — Medium term
- Transparency of Legal Persons and Arrangements
  - Adopt a risk-based approach to preventing the misuse of legal persons and arrangements as understanding of “high-end” ML deepens and as intelligence gaps are addressed. — Medium term
  - Consider measures to enhance transparency of foreign legal entities and arrangements. — Medium term
  - Consider imposing disclosure requirements on nominee directors. — Medium term
  - Enhance AML/CFT compliance in the TCSP sector. — Medium term
  - Enhance the transparency of express trusts, notably by transposing the 4AMLD. — Medium term

- Timing note: “Near term” is within six months; “medium term” is within six to 18 months.

*Prepared by Richard Lalonde and Yasmin Almeida, Legal Department, IMF.*

### 7.      The U.K.’s 2011 FSAP provides a comprehensive overview of the U.K.’s AML/CFT

### 7.      The U.K.’s 2011 FSAP provides a comprehensive overview of the U.K.’s AML/CFT framework as assessed in 2007 and the steps taken by the authorities to address the shortcomings identified as reported in the FURs.

### Overview and context
- The U.K. has yet to be assessed against the prevailing FATF standard, which was revised in 2012, with methodology revised in 2013. The U.K. is tentatively scheduled to undergo an assessment against the prevailing standard in March/April 2018.
- The revised FATF standard:
  - Places greater emphasis on a risk-based approach to AML/CFT and on assessing the effectiveness of the AML/CFT regime.
  - Includes tax crimes as predicate offenses to ML.
  - Extends enhanced due-diligence obligations for foreign PEPs to also cover domestic PEPs in cases of a higher-risk business relationship.

### National Risk Assessment (NRA)
- The U.K. conducted an ML/TF NRA; results published in October 2015. The NRA was conducted by HM Treasury and the Home Office in consultation with law enforcement agencies, the U.K. FIU, supervisors, and private sector representatives.
- Objectives and scope:
  - Identify, assess, and understand ML/TF risks and adopt mitigating measures commensurate with those risks.
  - Take stock of collective knowledge of ML/TF risks, identify intelligence gaps, and consider effectiveness of current AML/CFT regime.

- Key findings (criminal proceeds and impact):
  - Fraud and tax offenses identified as main proceed-generating crimes.
  - The tax gap related to tax crimes and evasion in 2012/13 was estimated at almost GBP 10 billion.
  - Narcotics trafficking market value estimated at approximately GBP 4 billion per year.
  - HM Government estimates serious and organized crime have an annual social and economic cost of GBP 24 billion.
  - Some non-governmental organizations estimate that between GBP 2,357 billion is laundered within and through the U.K. each year.
  - The NCA assesses that hundreds of billions of U.S. dollars of criminal money almost certainly continue to be laundered through U.K. banks, including their subsidiaries, each year.

- Intelligence gaps and vulnerabilities:
  - Better understanding exists for cash-based ML; significant intelligence gaps for “high-end” ML through financial and professional services sectors.
  - “High-end” ML sources: major fraud and serious corruption, notably overseas corruption; corruption believed to result in billions of pounds worth of suspected proceeds laundered through the country each year.
  - Law enforcement traditionally focused on cash-based ML and drug trafficking, leading to understanding of vulnerabilities in cash collection networks, international controllers, and MSBs.
  - More is needed to address intelligence gaps where proceeds are held in bank accounts, real estate and other investments, and to understand vulnerabilities in financial and professional services sectors.

- Supervisory vulnerabilities:
  - Inconsistencies in supervision identified as a source of vulnerability.
  - U.K. supervisory regime comprises 27 supervisors, including public sector organizations and professional bodies.
  - Use of professional bodies as supervisors may give rise to potential conflicts of interest.
  - Large number of supervisors could undermine consistent application of AML/CFT controls and “fit-and-proper” requirements, creating incentives for regulatory arbitrage.
  - NRA did not find evidence professional-body supervision undermines effectiveness, but the supervisory model could be revisited.

- Terrorist financing (TF) findings:
  - TF poses a significant threat to national security; combating TF part of U.K.’s “CONTEST” counter-terrorism strategy since 2011.
  - Focus on reducing terrorist fundraising domestically and overseas, and restricting movement of TF-related funds.
  - Sectors most vulnerable: MSB sector (low number of TF-related SARs and ability to circumvent €1,000 reporting threshold) and cash couriers.
  - NPO and banking sectors considered exposed to TF risks to a lesser extent (medium-high and medium TF risks, respectively).
  - The U.K. has had 17 convictions for TF-related offenses between September 2001 and June 2014, though this does not necessarily reflect all disrupted TF activity.

- Policy intent:
  - Findings of NRA to inform government’s AML Action Plan to address intelligence gaps (notably “high-end” ML), align law enforcement response with ML/TF risks, reform SARs regime, enhance U.K. FIU capacity, improve consistency of supervision and information exchange, and improve understanding of ML/TF risks across regulated sectors.
  - NCA adopted a strategy and action plan in December 2014 to tackle “high-end” ML.

### Legislative framework developments and transposition of 4AMLD
- Recent legislative/regulatory amendments and planned actions:
  - Authorities will transpose the Fourth EU AML Directive (4AMLD) by June 2017 to bring framework in line with the 2012 FATF standard.
  - Serious Crime Act 2015 substantially amended asset recovery regime under POCA 2002: easier to obtain freezing orders; extended financial investigative powers to trace assets post-confiscation; civil recovery regime enhanced by Crime and Courts Act 2013 for overseas criminal property recovery; introduced new “participation” offense; provided immunity from civil liability for making an SAR in good faith.
  - The 2007 MLRs were amended in 2012 and 2015: extended definition of real estate agents to include those selling U.K. properties outside the U.K.; enhanced “fit-and-proper” requirements for MSBs and TCSPs; enabled law enforcement to impose fines for failure to comply with information notices; introduced information-sharing powers among supervisory authorities (subject to conditions); designated CILEx as supervisor for legal executives (2015).
  - Terrorism (UN Measures) Order 2006 replaced by Terrorist Asset-Freezing Act (TAFA) 2010 (implementing UNSCR 1373 and successors).
  - U.K. intends to transpose 4AMLD by June 2017; 4AMLD changes include:
    - Measures to enhance transparency of legal persons and arrangements through central registers of beneficial ownership information.
    - Extending enhanced CDD to domestic PEPs.
    - Reducing CDD threshold for high value dealers from €15,000 to €10,000.
  - Accompanying Fund Transfer Regulation will come into force in the U.K. in June 2017 to improve traceability of transfers of funds.

### Enhancing effectiveness: institutions, SARs, and information exchange
- Institutional changes and initiatives:
  - Establishment of the NCA in October 2013 to lead efforts against serious and organized crime.
  - NCA’s Economic Crime Command (ECC) combats ML, hosts the U.K. FIU (receipt, analysis, dissemination of financial intelligence) and the Proceeds of Crime Centre (accreditation and monitoring of financial investigations in England, Wales, Northern Ireland).
  - Establishment of an International Corruption Unit (ICU) in May 2015 to enhance intelligence and response to overseas bribery and corruption.

- SARs regime and issues:
  - SARs regime identified as priority due to deficiencies in reporting quality across regulated sectors.
  - DNFBPs account for only 2.8 percent of all SARs submitted to the FIU in 2014; banking sector submitted 82 percent.
  - Number of SARs increased approximately 12 percent from 2013 to 2014, reaching 354,186 SARs in total; emphasis should be on improving quality over quantity.
  - Shortcomings identified in “consent requests” under POCA SARs regime; businesses can request consent from FIU to proceed with activity raising ML concerns as potential defense; FIU can refuse consent to allow LEAs to act.
  - Transparency International highlighted potential for abuse (defensive reporting, offloading due diligence to FIU).
  - Authorities launched a Call for Information in February 2015 on enhancing SARs regime and should adopt measures to enhance quality and consistency of reporting.

- Information exchange and cooperation initiatives:
  - Serious and Organised Crime Financial Sector Forum (quarterly) to facilitate collaboration between law enforcement, regulators, and financial sector to disrupt serious and organized crime and facilitate asset recovery.
  - Joint Money Laundering Intelligence Taskforce (JMLIT) set up in February 2015 as a 12-month pilot to provide a forum for information and intelligence exchange on current and emerging ML and economic crime threats and on detection, prevention, and disruption.

### Conclusions and policy recommendations (from the authorities/IMF)
- Continue implementing initiatives to bring AML/CFT regime in line with revised FATF standard. Specific recommendations:
  - Adopt an AML/CFT strategy and action plan in line with NRA findings; addressing intelligence gaps for “high-end” ML is key.
  - Reform the SARs regime to enhance the quality and consistency of reporting across regulated sectors, drawing on NRA findings and February 2015 Call for Information.
  - Transpose the 4AMLD, notably by updating the 2007 MLRs.
  - Consider reviewing AML/CFT supervisory model in light of NRA vulnerabilities; address inconsistencies in supervision and enforcement across FIs and DNFBPs and ensure risk-based approach by each supervisor. The current supervisory regime comprises 27 supervisors (public sector organizations and professional bodies) and could be revisited.

### AML/CFT measures in the banking sector — ML/TF vulnerabilities
- Banking sector is the most vulnerable to ML activity in the U.K. due to size, complexity, range of products/services, transaction volumes, and international interconnectedness.
- Key systemic statistics and context:
  - U.K. was highest-ranked country in terms of both interconnectedness and composite rank in IMF assessment of strategically important financial sectors.
  - U.K. has the largest banking sector on a residency basis and relative to GDP, standing at around 450 percent in 2013 compared to 100 percent in 1975.
  - Foreign banks constitute around half of U.K. banking sector assets on a residency basis.
  - Nearly a fifth of global banking activity is booked in the U.K.

- Scale estimates and assessments:
  - True scale and origin of criminal proceeds placed in or moved through the U.K. is an intelligence gap, but believed to be considerable.
  - Some NGOs estimate between GBP 2,357 billion laundered within and through the U.K. each year.
  - NCA assesses that hundreds of billions of U.S. dollars of criminal money almost certainly continue to be laundered through U.K. banks each year.

- Common deficiencies observed by the FCA since 2012:
  - Inadequate governance and oversight of ML risk.
  - Inadequate risk assessment processes to identify high-risk customers; poor management of high-risk customers and PEPs, particularly in establishing source of wealth and source of funds for PEPs.
  - Inadequate due diligence on correspondent banks.
  - Inadequate or poorly calibrated AML/sanctions-related IT systems.
  - Weaknesses in handling of alerts relating to sanctions and/or transaction monitoring.
  - Poor judgments or questionable decisions leading firms to take on unacceptable ML risk.
- Emerging developments for firms to be mindful of: mobile payments and virtual currencies.

*UNITED KINGDOM — INTERNATIONAL MONETARY FUND*

### 27.      According to the NRA, banks believe more work is required on understanding and

### _cr16165 - 27.      According to the NRA, banks believe more work is required on understanding and

### Banks’ AML/CFT Risk-Assessment Findings
- Banks believe more work is required on understanding and developing AML/CFT risk assessments.
- FCA thematic supervisory work found the quality of banks’ client risk assessments to be weak.
- Many banks with weak risk assessments showed little to no understanding of vulnerabilities in their products, services, and distribution lines.
- Some firms have conducted gap analyses against the FCA’s Financial Crime Guidance and other sources such as the Joint Money Laundering Steering Group’s guidance.

### Supervisory Observations and Remediation
- FCA supervisory inspections continue to find weaknesses in financial firms’ AML controls, but authorities deem the situation is improving.
- Some banks require significant investment to remediate deficiencies, for example, to replace—or bring together—legacy systems.
- Many firms have major remedial plans in place; for some larger firms these plans will take several years to implement and carry significant execution risk.
- Large banks increasingly recognize AML as requiring senior management attention and a robust message from the top.
- Private banks and wealth management firms are generally performing better on AML issues than retail and wholesale banks.

### Risk-Based Supervision of the Banking Sector
- The FCA is the primary U.K. supervisor charged with combating the abuse of financial services in regulated financial services organizations including banks; FSMA sets an operational objective of protecting and enhancing the integrity of the U.K. financial system.
- Since 2012, the FCA (and predecessor FSA) has strengthened its regulatory process via:
  - improving its understanding of financial risk in firms;
  - changing bank behaviors through enforcement and supervisory early intervention;
  - enhancing supervision (more intrusive and risk-based supervision for large and small firms);
  - further thematic work into higher-risk situations;
  - growing specialist financial crime expertise;
  - better outreach and information sharing.
- The FCA estimates some 15,000 firms are subject to the MLRs, of which 900 are deposit-taking institutions.

- Systematic AML Program (SAMLP):
  - Introduced in 2012 for “deep dive” comprehensive testing across 14 major retail and investment banks operating in the U.K.
  - Operates on a four-year, rolling cycle.
  - On-site SAMLP work in a bank lasts around three months and is intensive, involving detailed testing and extensive interviewing.
  - FCA also visits selected operations of U.K.-incorporated banks outside the EEA where U.K.-equivalent AML standards are required.
  - Institutions in the next band are subject to regular on-site visits on a two-year cycle; these visits last two–four days.

- 2014 supervisory strategy:
  - Targets resources more effectively, focusing on firms that present the highest ML risk irrespective of size.
  - All regulated firms are grouped into risk bands; highest-risk firms subject to either extensive SAMLP assessment or regular visit program.
  - Lower-risk firms are monitored by risk alerts, event-driven reactive supervision, thematic sector-wide reviews, and desk-based AML reviews.
  - Lower-risk firms constitute the majority of firms but represent only 1–5 percent of the market share by volume.

- Thematic and casework activity:
  - FCA thematic sample sizes generally around 20–30 firms.
  - Since 2012, thematic reviews include Banks’ controls of financial crime risks in trade finance (2013), AML and ABC systems and controls: asset management and platform firms (2013), and How smaller banks manage AML and Sanctions risks (2014).
  - Sources for casework include self-reporting, whistleblowers, intelligence from law enforcement, and public domain information.
  - Since August 2012, the FCA has conducted approximately 230 on-site AML review visits to banks (including 17 overseas visits) and a further 186 desk-based AML reviews.

- Outstanding supervisory questions:
  - AML/CFT supervisory framework for higher-risk banks appears adequate, but only time will tell whether adequacy extends across the entire range of banks given recent implementation.
  - Concern whether sufficient testing ensures lower-risk banks have appropriate policies, procedures, controls, and training.
  - The backstop for ensuring lower-risk firms effectively manage ML risks appears to be limited.

### Penalties Regime and Enforcement
- FCA powers under FSMA include varying or cancelling permissions to carry on regulated activities, issuing private censures, imposing unlimited financial penalties, and pursuing criminal sanctions.
- FCA applies a risk-based approach to enforcement case selection to achieve “credible deterrence.”
- New penalties regime introduced in 2010.
- Since 2012, the FCA has taken formal enforcement action against nine firms and individuals in response to AML failings, with fines totaling approximately GBP 96 million (USD 140 million).
  - The total includes a fine of GBP 72.1 million imposed in 2015 and GBP 7.6 million imposed in January 2014.
- Examples:
  - January 2014: GBP 7.6 million fine on a global bank for AML failings relating to corporate customers connected to PEPs (first FCA AML case focused on commercial banking activity and first application of higher fine under 2010 regime).
  - November 2015: GBP 72.1 million fine on a global bank for failure regarding customers that are PEPs.
- FCA is considering whether more cases should be referred for enforcement following specialist supervision work, particularly the thematic review of smaller banks’ AML and sanctions controls.
- FCA notes financial penalties are not the only deterrent; other tools include setting formal remedial plans, restricting higher-risk business until remediation, and seeking formal attestations from senior management.

### Conclusions and Recommendations (AML/CFT Supervision)
- Conclusions:
  - AML/CFT supervisory framework for higher-risk banks appears adequate, but adequacy across the entire banking range remains uncertain given recent implementation.
  - The FCA’s supervisory strategy better targets highest ML risk firms irrespective of size, but the backstop for lower-risk firms appears limited.
  - Few fines have been imposed since 2010; it is unclear whether the penalties regime will be applied sufficiently dissuasively across all banks.
  - FCA emphasizes non-penalty tools have been used to deter non-compliance.

- Recommendations:
  - Determine whether the supervisory attention given to banks in the lowest-risk categories is sufficient to ensure they are effectively assessing and managing their risks.
  - Determine whether more cases should be referred for enforcement, particularly given the results of the FCA’s thematic review of smaller banks’ AML and sanctions controls.

### U.K. Corporate Landscape and ML Risks Involving Legal Persons and Arrangements
- Common legal persons and arrangements: companies, partnerships, and trusts; under Companies Act (2006) companies can be public or private, and limited or unlimited.
- Partnerships with legal personality include Scottish partnerships, Scottish limited partnerships (SLPs) and limited liability partnerships (LLPs); partnerships without legal personality include traditional partnerships and limited partnerships (LPs).
- Trusts: the most common form of legal arrangement in the U.K.

- Recent registration statistics:
  - As of November 2015, companies and LLPs registered with Companies House amount to over 3.6 million and 59,000, respectively.
  - This represents an increase of almost 30 percent for companies and around 18 percent for LLPs since November 2011.
  - LPs increased by over 72 percent since 2010/11, reaching 32.398 in 2014/15.
  - SLPs have more than doubled in the same time-period.
  - Conservative estimates suggest the number of express trusts formed in the U.K. is between 1.5 to 2 million.

- ML risks involving misuse of legal persons and arrangements:
  - Legal persons and arrangements can facilitate movement of large sums without attracting the same level of attention as natural persons.
  - Complex corporate structures can obfuscate ultimate beneficial ownership or transaction purpose, hindering detection, investigation, and prosecution.
  - NRA highlighted corporate structures particularly vulnerable: “shell” companies, “off the shelf” companies, “dormant” companies; case examples also show misuse of offshore companies and trusts.
  - Some partnerships (LPs and SLPs) are deemed less transparent due to lighter reporting obligations and shielding under the 1985 Companies Act.
  - Bearer shares, nominee directors, and corporate directors can conceal ownership and control:
    - Bearer shares: ownership passes with the certificate; holders do not appear on shareholder register.
    - Corporate director: a legal person acting as director.
    - Nominee director: non-executive director acting on behalf of another natural or legal person who effectively exercises control.
  - Legal persons and arrangements commonly facilitate “high-end” ML (laundering proceeds of large-scale fraud and serious corruption through financial, real estate, and professional services sectors).
    - TI report found over 75 percent of properties in the U.K. under investigation by the Metropolitan Police’s POCU are owned through a company incorporated in a “secrecy jurisdiction.”
    - Among companies holding properties under POCU investigation, 79 percent are incorporated in a Crown Dependency (CD) or Overseas Territory (OT): specifically 49 percent in Jersey, 15 percent in the Isle of Man, 10 percent in the BVI and 5 percent in Gibraltar.
  - Intelligence gaps exist with respect to “high-end” ML; NCA is committed to addressing these and the NRA recognizes the need to better understand the role of professional enablers.

*Source: _cr16165 - 27.      According to the NRA, banks believe more work is required on understanding and (IMF).*

### 52.      To mitigate the risks aforementioned, law enforcement relies on different sources of

### _cr16165 - 52.      To mitigate the risks aforementioned, law enforcement relies on different sources of

### Sources of information and current legal frameworks
- Law enforcement relies on information from: (i) the central register of companies, Companies House; (ii) filings with Her Majesty’s Revenue and Customs (HMRC); (iii) regulated entities subject to AML/CFT obligations, financial institutions and DNFBPs; and (iv) information kept with the legal person or arrangement itself. (para. 52)
- Companies House is responsible for incorporating and dissolving limited companies, registering legally required information, and making such information publicly available. Registered corporate entities include limited companies, LPs, LLPs, overseas companies with some degree of physical presence in the U.K., European economic interest groupings (EEIGs), and Societas Europaea (SEs). Companies registered in Jersey, Guernsey and the Isle of Man are excluded from the U.K. Companies Register. (para. 53)
- The top three legal entity types registered with Companies House are private limited companies, LLPs, and LPs (which include SLPs). Together they account for 99 percent of the legal entity types registered with Companies House, with private limited companies accounting for over 96 percent alone. (para. 54)

Key registration and disclosure mechanics
- All Companies Act companies must submit information on their directors and members upon registration and keep a register of directors and members available for inspection. Changes must be recorded in the registers within 14 days; changes to the register of directors must also be notified to Companies House. Companies must file an update of registered shareholders and the number of shares they hold on an annual basis via annual returns and now through a confirmation statement. (para. 55)
- LLPs and LPs must register with Companies House; registration requires member names and, for LPs, the names and amount of capital contributed by each limited partner; LLPs must provide addresses. Companies House must be notified of LLP/LP membership changes within 14 days. LLPs are required to file annual returns; LPs are not subject to annual disclosure obligations. Traditional partnerships under the Partnership Act are not registered with Companies House, though they may need to register with HMRC. (para. 56)
- There is no central register for express trusts; trusts may be required to register with HMRC for tax purposes, and trustees are under a common law obligation to hold information on the purpose, assets, and beneficiaries of the trust. (para. 58)

### Deficiencies in beneficial ownership transparency
- The 2006 U.K. mutual evaluation found access to adequate, timely and accurate beneficial ownership information to be lacking. Where beneficial ownership could not be obtained through regulated entities under AML/CFT obligations, law enforcement’s efforts to tackle ML and asset recovery were hindered. (para. 57)
- The 2006 assessment found measures lacking to ensure timely and adequate access to accurate and up-to-date information on beneficial ownership and control of trusts. (para. 58)

### Legislative reforms: G-8 commitments, SBEE Act, and PSC register
- As part of the 2013 U.K. G-8 Presidency, the U.K. adopted an Action Plan (July 2013) to require companies and trustees of express trusts to obtain and hold adequate, accurate, and current beneficial ownership information and to ensure competent authorities have access to this information—including through a central registry for companies. (para. 59)
- The Small Business, Enterprise and Employment Act (SBEE Act) (2015) includes:
  - Establishment of a register of people with significant control (PSC).
  - Abolition of bearer shares (no bearer shares may be issued effective May 2015; existing bearer shares must be surrendered by February 2016). (para. 60, 63)
  - Prohibition of the appointment of corporate directors subject to exceptions, simplification of filing requirements by replacing the annual return with a confirmation statement, and strengthening fit-and-proper requirements for directors. (para. 60)
- PSC register specifics:
  - Companies required to start holding a register of PSCs as of April 6, 2016, and file this information with Companies House from June 30, 2016. The PSC regime scope includes LLPs and SEs. (para. 61)
  - "Significant control" is defined by meeting one (or more) of five conditions: holding, directly or indirectly, more than 25 percent of shares, or voting rights; holding the right, directly or indirectly, to appoint or remove a majority of the board of directors; having the right to exercise, or actually exercise, significant influence over the company; or having significant control over a trust or firm. (para. 61)
  - The PSC is by definition a natural person, but legal persons can be entered where relevant and registrable under the SBEE Act (e.g., where the legal entity keeps its own PSC register). (para. 61)
- Limitations relative to EU 4AMLD:
  - The scope of the PSC register falls short of 4AMLD, which calls for a central register of all corporate and legal entities. The U.K. will need to include SLPs under the PSC register, as these have separate legal personality. 4AMLD requires that the information held in the central register is current. (para. 62)
  - Authorities have until June 2017 to transpose 4AMLD measures on trusts. (para. 65)

### Nominee directors, bearer shares, and trusts
- Abolishing bearer shares is expected to enhance transparency; no bearer shares may be issued effective May 2015 and existing bearer shares must be surrendered by February 2016. (para. 63)
- The authorities reviewed nominee directors; after consultation, they opted for measures enhancing communication on directors’ obligations, promoting early intervention, and tightening enforcement of directors’ statutory duties. However, it is unclear to what extent these measures prevent willful misuse of nominee director arrangements for ML purposes. The report encourages revisiting the possibility of establishing a register of nominee directors and those on whose behalf they operate, notably regarding TCSPs that act as nominee directors. (para. 64)

### Trusts and 4AMLD requirements
- 4AMLD introduces requirements for express trusts, including:
  - Trustees must obtain and hold adequate, accurate, and up-to-date information on beneficial ownership, including the identity of beneficiaries and any natural person who exercises effective control.
  - Trustees must disclose their status and provide information on beneficial ownership when engaging with regulated entities subject to AML/CFT obligations.
  - Countries must set up an accurate and up-to-date central register of beneficial ownership of express trusts where these give rise to tax liability. (para. 65)

### Trust or Company Service Providers (TCSPs): risks, regulation, and supervision
- TCSP services include forming companies or other legal persons; acting or arranging for another to act as director, partner, or in a similar position; providing a registered office, business address, correspondence or administrative address; acting or arranging for another to act as trustee of an express trust or nominee shareholder. (para. 66; footnote describing 2007 MLRs definition)
- About three quarters of overall new companies in 2012/13 were incorporated through a third party. (para. 66)
- TCSPs fall within the regulated sectors under the 2007 MLRs and are required to conduct CDD, keep records, and report suspicious activity to the FIU. CDD obligations include identifying and verifying the customer’s identity and the beneficial owner where different from the customer; where the customer is a legal person or arrangement, adequate measures must be taken to understand ownership and control structure. These measures apply when establishing a business relationship, for occasional transactions amounting to €15,000 or more, where an ML/TF suspicion arises, or where there is doubt about information veracity. TCSPs must comply with fit-and-proper requirements specified in the regulations. (para. 67)
- Supervision of TCSPs is fragmented across multiple supervisory bodies (default supervisor being HMRC), resulting in inconsistent monitoring and enforcement; at the time of the NRA the total number of registered TCSPs operating in the U.K. was unknown. (para. 68)
- Reporting by TCSPs and related sectors is low relative to identified risks: accountancy and legal service providers were rated high structural and overall risk in the NRA; TCSPs rated medium. SARs reported by these sectors represented less than 3 percent of all SARs received between October 2013 and September 2014; the TCSP sector reported 0.05 percent of the total (or 177 SARs). (para. 69)

### Conclusions and policy recommendations
- Recent reforms (PSC register, abolishing bearer shares, corporate director restrictions) are welcome, but additional steps are recommended to enhance availability of beneficial ownership and control information across a broader range of legal entities and arrangements. (para. 70)
- Recommended actions (as outlined in the report): (para. 70)
  - Adopt a risk-based approach to preventing the misuse of legal persons and arrangements as understanding of “high-end” ML deepens and intelligence gaps are addressed; further understand ML risks posed by different types of legal persons and arrangements, including foreign legal persons and arrangements.
  - Consider measures to enhance transparency of foreign legal entities and arrangements; as a first step consider bringing foreign companies required to register with Companies House within the scope of the PSC register.
  - Impose disclosure requirements on nominee directors, either through a central register or a licensing regime; in particular, impose disclosure requirements on TCSPs that act as nominee directors.
  - Enhance AML/CFT compliance of the TCSP sector to improve the availability and quality of beneficial ownership information accessible to law enforcement and enforce adequate fit-and-proper requirements to safeguard the sector against criminals.
  - Enhance transparency of express trusts, notably by transposing the 4AMLD so that competent authorities have access to adequate, timely and accurate information on beneficial ownership and control of express trusts.

*Source: Extract from IMF country report content unit _cr16165 (pages 25–30) on U.K. transparency reforms, PSC register, TCSPs, and 4AMLD transposition.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16165.pdf_