EG 19.14 The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 20171

1The FCA has investigation and sanctioning powers in relation to both criminal and civil breaches of the Money Laundering Regulations. The Money Laundering Regulations impose requirements including, amongst other things, obligations to apply customer due diligence measures and conduct ongoing monitoring of business relationships on designated types of business.

1The FCA is responsible for monitoring and enforcing compliance with the Money Laundering Regulations2 not only by authorised firms who are within the Money Laundering Regulations’ scope, but also by what the Regulations describe as “Annex I financial institutions”. These are businesses which are not otherwise authorised by us but which carry out certain of the activities listed in Annex I of the Banking Consolidation Directive²⁸, now Annex I of the CRD. The activities include lending (e.g. forfaiters and trade financiers), financial leasing, and safe custody services. Annex I financial institutions are required to register with the FCA.

²⁸ Money2 service businesses are also outside the definition of “Annex I financial institution”, which is set out in Regulation 55(2) of the Money Laundering Regulations2.

2The FCA is also responsible for monitoring and enforcing compliance with the Funds Transfer Regulation by payment service providers specified under regulation 62(1) of the Money Laundering Regulations.

1The Money Laundering Regulations add to the range of options available to the FCA for dealing with anti-money laundering and anti-terrorist financing 2 failures. These options include2:

• • to prosecute a relevant person, including but not limited to an 2authorised firm, an 2Annex I financial institution or an auction platform, as well as any responsible officer2;

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• • to fine or censure a relevant person, including but not limited to an2 authorised firm, an2 Annex I financial institution or an auction platform, as well as any officer knowingly concerned in the breach,2under regulation 762 of the Money Laundering Regulations;2
• • to cancel, suspend or impose limitations or other restrictions on the authorisation or registration of an authorised person or payment service provider, under regulation 77 of the Money Laundering Regulations; and2
• • to impose a temporary or permanent prohibition on an officer knowingly concerned in a breach by a relevant person, including an authorised firm or Annex I financial institution, or a payment service provider, under regulation 78 of the Money Laundering Regulations.2

1This means that there will be situations in which the FCA has powers to investigate and take action under both the Act and the Money Laundering Regulations. The FCA will consider all the circumstances of the case when deciding what action to take and, if it is appropriate to notify the subject about the investigation, will in doing so inform them about the basis upon which the investigation is being conducted and what powers it is using. The FCA will adopt the approach outlined in EG 12 when prosecuting Money Laundering Regulations offences. In the majority of cases where both the Regulations and the FCA rules apply and regulatory action, as opposed to criminal proceedings, is appropriate, the FCA generally expects to continue to discipline authorised firms under the Act.

1The Money Laundering Regulations also provide investigation powers that the FCA can use when investigating whether breaches2 have taken place. These powers include:

• • the power to require information from, and attendance of, relevant persons, payment service providers2 and connected persons (regulation 662); and
• • powers of entry and inspection without or under warrant (regulations 69 and 702).

The use of these powers will be limited to those cases in which the FCA is exercising functions under the Money Laundering Regulations. In addition, the FCA may use its powers to require information or attendance at the request of foreign authorities2.

1The FCA will adopt a risk-based approach to its enforcement under2 the Money Laundering Regulations. Failures in anti-money laundering or counter-terrorist financing2 controls will not automatically result in disciplinary sanctions, although enforcement action is more likely where a firm has not taken adequate steps to identify its2 risks or put in place appropriate controls to mitigate those risks, and failed to take steps to ensure that controls are being effectively implemented.

1However, the Money Laundering Regulations say little about the way in which investigation and sanctioning powers should be used, so the FCA has decided to adopt enforcement and decision making procedures which are broadly akin to those under the Act. Key features of the FCA's approach are described in EG 19.152.