MLR 2017 reform: what to expect from the Treasury's call for evidence
HM Treasury has invited industry views on simplified due diligence thresholds, pooled client account treatment, the cryptoasset travel-rule perimeter and the future of the high value dealer regime. Firms should not read the exercise as a signal of deregulation — the direction of travel remains toward sharper risk-based expectation, clearer beneficial ownership evidence and faster information-sharing between the regulated sector and law enforcement. We set out where firms should focus their response and the drafting traps to avoid when supporting a change in the primary framework.
Why this consultation matters
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 have been amended more than a dozen times since they were made. The current call for evidence is the first structural review since the UK left the EU AML framework and is the vehicle through which HM Treasury intends to consolidate a body of guidance that has grown up in parallel with the primary rules.
Firms responding should treat the exercise as an opportunity to raise operational friction that has no supervisory benefit — not as a chance to argue for lower substantive standards. The Treasury has signalled that the risk-based approach will be reinforced rather than relaxed.
Areas most likely to move
Simplified due diligence thresholds for low-risk product categories are back on the table, particularly in relation to electronic money and low-value payment products where the current calibration has produced onboarding failures at scale for legitimate customers.
Pooled client account treatment for the legal and property sectors is expected to be reframed around the underlying beneficial owner rather than the account holder, aligning with the FATF standard and closing a route that has repeatedly featured in enforcement.
The cryptoasset travel-rule perimeter will be tightened for cross-border transfers, with the threshold reduced and the information set expanded to match the FATF Recommendation 16 update.
What to include in a response
Ground every submission in concrete customer-file evidence. Anecdote will not move the drafting; a worked example showing where the current rule produces disproportionate outcomes will.
Where a firm proposes a change, set out the compensating control that would preserve the supervisory outcome. Treasury officials will discount proposals that appear to weaken the framework without a corresponding uplift elsewhere.