Changes to the Money Laundering Regulations — what to review

Previously, mandatory EDD applied broadly to high-risk third countries, covering both the FATF blacklist and grey list. From 30 June, mandatory EDD applies specifically where there is involvement with a FATF “Call for Action” country (the blacklist) — the highest-risk jurisdictions.

This does not mean grey-list or other higher-risk countries can be ignored. They must still be weighed as part of your wider customer risk assessment, with EDD applied where the overall risk profile justifies it.

EDD is now required where a transaction is unusually complex or unusually large having regard to the nature of the transaction. The key word is unusual — complexity alone is not the trigger. The question is whether the complexity or size is unusual for that type of customer, property, structure or funding.

Examples might include multiple third-party funders, layered ownership, unusual source-of-funds explanations, offshore structures, or arrangements without a clear economic or legal purpose. Where these arise, document the rationale for applying — or not applying — EDD.

The Regulations replace certain euro-denominated thresholds with sterling. For letting agency activity, the relevant customer due diligence trigger is now aligned to a £10,000 threshold.

This may change whether some lettings clients or transactions fall within scope — particularly those that were previously borderline. It is worth re-checking your current lettings instructions against the new figure.

The wider theme across all the changes is the continued importance of a properly evidenced risk-based approach. The amendments make the regime more proportionate, but that does not reduce the need for clear judgement, proper documentation and timely escalation.

Customer risk assessments should be fully completed and reasoned, and decisions to apply simplified, standard or enhanced due diligence should be justified. Any uncertainty should be escalated rather than left unresolved.