Mutual Evaluation Ratings of the United Kingdom

1. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in the United Kingdom
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
December 2018
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-united-kingdom-2018.html

2. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which the UK
has achieved
this objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
High
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Moderate
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

3. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which the UK
has achieved
this objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Substantial
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Moderate
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Substantial
8. Proceeds and instrumentalities of crime are confiscated. Substantial
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which the UK
has achieved
this objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
High
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
High
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
High
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018 5
Ratings – Effectiveness
December 2018

6. 6-Dec-18
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LargLarLarLar Largely Compliant
2. National cooperation and coordination ComCo ComCom Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence ComCo ComCom Compliant
4. Confiscation and provisional measures ComCo ComCom Compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence ComCo ComCom Compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing LargLarLarLar Largely Compliant
7. Targeted financial sanctions related to proliferation LargLarLarLar Largely Compliant
8. Non-profit organisations ComComComCom Compliant

7. 6-Dec-18
7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws ComCo ComCom Compliant
Customer due diligence and record keeping
10. Customer due diligence LargLarLarLar Largely Compliant
11. Record keeping ComCo ComCom Compliant
Additional measures for specific customers and activities
12. Politically exposed persons ComCo ComCom Compliant
13. Correspondent banking Par Pa ParPar Partially Compliant
14. Money or value transfer services ComCo ComCom Compliant
15. New technologies LargLarLarLar Largely Compliant
16. Wire transfers ComComComCom Compliant

8. 6-Dec-18
8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties LargLarLarLar Largely Compliant
18. Internal controls and foreign branches and subsidiaries LargLarLarLar Largely Compliant
19. Higher-risk countries LargLarLarLar Largely Compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions ComCo ComCom Compliant
21. Tipping-off and confidentiality ComCo ComCom Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence LargLarLarLar Largely Compliant
23. DNFBPs: Other measures LargLarLarLar Largely Compliant

9. 6-Dec-18
9
Ratings – technical compliance
(4/5)
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL
PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons LargLarLarLar Largely Compliant
25. Transparency and beneficial ownership of legal arrangements ComComCo Co Compliant
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions ComComCo Co Compliant
27. Powers of supervisors ComComCo Co Compliant
28. Regulation and supervision of DNFBPs ComComCo Co Compliant
Operational and Law Enforcement
29. Financial intelligence units PartParPa Pa Partially Compliant
30. Responsibilities of law enforcement and investigative
authorities ComComCo Co Compliant
31. Powers of law enforcement and investigative authorities ComComCo Co Compliant
32. Cash couriers LargLarLarLar Largely Compliant

10. 6-Dec-18
10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics LargLarLarLar Largely Compliant
34. Guidance and feedback ComCo Co Co Compliant
Sanctions
35. Sanctions ComCo Co Co Compliant
INTERNATIONAL COOPERATION
36. International instruments ComCo Co Co Compliant
37. Mutual legal assistance LargLarLarLar Largely Compliant
38. Mutual legal assistance: freezing and confiscation ComCo Co Com Compliant
39. Extradition ComCo Co Co Compliant
40. Other forms of international cooperation LargLarLarLar Largely Compliant

11. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018 11
Ratings – technical compliance
December 2018

12. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
 The UK has a robust understanding of its ML/TF risks which
is reflected in its public national risk assessments (NRAs).
National AML/CFT policies, strategies and activities seek to
address the risks identified in the NRAs. National co-
ordination and co-operation on AML/CFT issues at both the
policy and operational levels has improved significantly
since the last evaluation.
 The UK proactively investigates, prosecutes and convicts a
range of TF activity, in line with its identified risks in this
area. A particularly positive feature of the system is the
strong public/private partnership on TF matters. This is
facilitated by the Joint Money Laundering Intelligence Task
Force (JMLIT) which facilitates public/private information
sharing including on TF and ML investigations.
12
December 2018

13. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
December 2018
13
 The UK routinely and aggressively identifies, pursues and
prioritises ML investigations and prosecutions. It achieves
around 7 900 investigations, 2 000 prosecutions and 1 400
convictions annually for standalone ML or where ML is the
principal offence. The UK investigates and prosecutes a
wide range of ML activity. Investigations of high-end ML (a
long-standing risk area for the UK) have increased since
being prioritised in 2014. These cases generally take years
to progress to prosecution and conviction and limited
statistics are available on high-end ML investigations,
prosecutions and convictions prior to its prioritisation in
2014. As a result, it is not yet clear whether the level
prosecutions and convictions of high-end ML is fully
consistent with the UK’s threats, risk profile and national
AML/CFT policies.

14. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
14
December 2018
 Another strong point of the system is that all entities within
the FATF definition of financial institutions and all DNFBPs
are subject to comprehensive AML/CFT requirements and
subject to supervision. Supervisors’ outreach activities, and
fitness and proprietary controls are generally strong. Each
supervisor takes a slightly different approach to risk-based
supervision. However, while positive steps have been taken,
there are weaknesses in the risk-based approach to
supervision even among the statutory supervisors.

15. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
 The UK has been a leader in designating terrorists at the UN and
EU level, and takes a leading role promoting effective global
implementation of proliferation-related TFS. The UK has frozen
assets and other funds pursuant to its proliferation financing
sanctions program and taken steps to increase the overall
effectiveness of its targeted financial sanctions (TFS) regime,
including through the creation of the Office of Financial Sanctions
Implementation and the strengthening of penalties for breaching
TFS. However, minor improvements are required in relation to
applying penalties for sanctions breaches, ensuring consistent
application of TFS and communicating designations immediately.
The UK has a good understanding of the TF risks associated with
NPOs and has been effective in taking action to protect the
sector from abuse. The UK also has a robust confiscation regime
through which it can and does deprive terrorists of assets.
15
December 2018

16. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
16
December 2018
 Available financial intelligence and analysis is regularly used
by a wide range of competent authorities to support
investigations of ML/TF and related predicate offences,
trace assets, enforce confiscation orders and identify risks.
However, the UK has made a deliberate policy decision to
limit the role of the UK Financial Intelligence Unit (UKFIU) in
undertaking operational and strategic analysis which calls
into question whether suspicious activity report (SAR) data
is being fully exploited in a systematic and holistic way and
providing adequate support to investigators. Additionally,
while reports of a high quality are being received, the SAR
regime requires a significant overhaul to improve the
quality of financial intelligence available to the competent
authorities.

17. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Key findings
17
December 2018
 The UK is a global leader in promoting corporate transparency and has
a good understanding of the ML/TF risks posed by legal persons and
arrangements. The UK has a comprehensive legal framework requiring
all financial institutions and all DNFBPs to conduct customer due
diligence and obtain and maintain beneficial ownership information in a
manner that is generally in line with the FATF requirements. Beneficial
information on trusts is available to the competent authorities through
a registry of trusts with tax consequences in the UK. The information in
the trust register is verified for accuracy, but the register itself is not yet
fully populated. For legal persons, basic and beneficial ownership
information is freely and immediately available to the public and all
competent authorities through a central public register. This
information is not verified for accuracy which limits its reliability.
Authorities confirmed that beneficial ownership information, where
held in the UK, was obtainable for investigative purposes in a timely
manner via available informal and formal investigative tools, including
JMLIT and the NCA s.7 gateway.

18. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Priority Actions for the United Kingdom
to strengthen its AML/CFT System
18
December 2018
 Substantially increase the human resources available to the
UKFIU and review the UKFIU’s role to ensure that financial
intelligence is fully exploited in the context of the significant
ML/TF risks faced by the UK and so it is better able to co-
operate with foreign FIUs. Substantially increase the
UKFIU’s IT capacity, including by updating analysis software,
ensuring sophisticated screening of SARs and allowing
automatic checks against multiple databases.
 Prioritise reform of the SAR regime, including by
modernising reporting mechanisms so they are fit-for-
purpose for the whole range of reporting entities and
making the on-line SAR form (or its replacement) more
user-friendly.

19. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Priority Actions for the United Kingdom
to strengthen its AML/CFT System
 Continue to improve the quality of information available on the PSC register
to ensure that the information is accurate and up-to-date by: pursuing
planned work with OFSI to screen information against sanctions lists and
share this information as appropriate; ensuring that FIs, DNFBPs and LEAs
report identified discrepancies to Companies House; continuing to improve
the register’s functionality (facilitate searching); where appropriate, clearly
flagging in the register any discrepancies reported by FIs, DNFBPs, or LEAs;
and ensuring Companies House continues to report suspicions to relevant
authorities, including by filing a SAR as appropriate.
 The FCA should consider how to ensure appropriate intensity of supervision
for all the different categories of its supervisory population from low risk to
high risk. .HMRC should consider how to ensure appropriate intensity of
supervision for all the different categories of its supervisory population
from low risk to high risk. HMRC should ensure that it properly takes into
account ML/TF when risk rating firms subject to their supervision.
Supervisors should continue to ensure, in accordance with the increased
trend for levying penalties, that proportionate, dissuasive and effective
sanctions are applied for violations of AML/CFT and sanctions obligations.
19
December 2018

20. Anti-money laundering and counter-terrorist financing measures in the United Kingdom - Mutual Evaluation Report - December 2018
Priority Actions for the United Kingdom
to strengthen its AML/CFT System
 Continue its efforts to address the significant weaknesses in
supervision by the 22 legal and accountancy sector
supervisors through: ensuring consistency in ML/TF risk
understanding; taking a risk-based approach to supervision;
and ensuring that effective and dissuasive sanctions apply.
The UK should closely monitor the impact of the Office of
Professional Body and Association Supervisors (OPBAS) in
undertaking this work.
 Ensure the UKFIU provides assistance to a larger extent to
international partners.
 To the extent possible, work with international partners to
endeavour to ensure that the UK continues to use and
access regional co-operation tools and information-sharing
gateways comparable to those available to the UK under
the EU framework.
20
December 2018