I beg to move,
That the Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021 (S.I., 2021, No. 392), dated 24 March 2021, a copy of which was laid before this House on 25 March, be approved.
This Government are committed to combating money laundering and terrorist financing and recognise the threat of economic crime to our financial system. Illicit finance risks damaging not only our national security, but our reputation as a global financial centre by undermining the integrity and stability of our markets and institutions.
While it is right that we stamp out the scourge of illicit finance for the benefit of the United Kingdom, it is also right that we do so because of our responsibilities to the wider world. When illicit finance flourishes, so does serious and organised crime, such as people and drug trafficking and terrorism. These are acts that have huge social and economic costs and, of course, cause unimaginable suffering. That is why the Government are focused on making the UK a hostile environment for illicit finance. As part of this work, we have taken significant action to tackle money laundering while strengthening the response of the whole financial system to economic crime.
The bedrock of these efforts is the money laundering regulations. This is the legislative framework that sets out a number of requirements that businesses falling under its scope must take to combat money laundering and the financing of terrorism. These requirements include the need for firms to implement measures to identify and verify the people and organisations with whom they have a business relationship or for whom they facilitate transactions.
In addition, the regulations require financial institutions and other regulated sector businesses to carry out greater scrutiny or enhanced due diligence in respect of business relationships and transactions involving so-called high-risk third countries. These are nations that have been identified as having strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes, and that pose a significant threat to the UK’s financial system. The statutory instrument under discussion this evening amends the definition of a high-risk third country in the money laundering regulations.
Allow me to explain the background to some of these changes. At present, the definition of a “high-risk third country” in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 is linked to retained EU law and references the list of countries identified by the European Commission as high risk. This list was previously operated via EU law, which no longer has an effect in the UK. If our legislation is not amended, the list will become outdated and could leave the United Kingdom at risk from those operating in nations with poor money laundering and terrorist financing controls.
Furthermore, the United Kingdom will risk falling behind international standards set by the Financial Action Task Force or FATF. This instrument will therefore amend the money laundering regulations to remove
references to the EU’s high-risk third countries list and insert a new list of countries identified in schedule 3ZA. This will be the UK’s new autonomous high-risk third countries list. It will mirror exactly the list of countries identified by the Financial Action Task Force as having strategic deficiencies in their anti-money laundering and counter-terrorist financing regimes, and it will keep the UK in line with international standards.
The change that I have outlined will allow us to continue to protect businesses and the financial system from those who pose a significant threat, while ensuring that the United Kingdom remains at the forefront of global standards in combating money laundering and terrorist financing. I thank Members for their examination of this important piece of legislation, and hope that colleagues will join me in supporting it this evening.
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