The Financial Action Task Force (FATF) was created in 1989 by the G7 Paris summit, building on UN treaties on trafficking of illicit substances in 1988 and confiscating the proceeds of crime in 1990. In 1990, FATF released their 40 recommendations for fighting money laundering. Between October 2001 and October 2004 it released nine further special recommendations to prevent terrorist funding.
In 1991, the European Commission issued its first money laundering directive to comply with the FATF recommendations. It applied to financial institutions, and required member states to make money laundering a criminal offence. It was incorporated into UK law via the Criminal Justice Act 1991, the Drug Trafficking Act 1994 and the Money Laundering Regulations 1993.
The second European Union money laundering directive issued in 2001 incorporated the amendments to the FATF recommendations. It extended anti-money laundering obligations to a defined set of activities provided by a number of service professionals, such as independent legal professionals, accountants, auditors, tax advisers and real estate agents. It was incorporated into UK law via the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2003.
The third money laundering directive issued in 2005 extended due diligence measures to beneficial owners, recognising that such measures can be applied on a risk-based approach, and required enhanced due diligence to be undertaken in certain circumstances. It is incorporated into UK law by the Money Laundering Regulations 2007 and the Terrorism Act 2000 (Amendment) Regulations 2007 (TACT regulations 2007) and Proceeds of Crime Act 2002 (Amendment) Regulations 2007 (POCA regulations 2007).
The legislation which embodies the UK anti-money laundering and counter terrorist financing regime is contained in:
POCA, as amended, establishes a number of money laundering offences including:
POCA applies to all persons, although certain failure to report offences and the tipping off offences only apply to persons who are engaged in activities in the regulated sector.
The Terrorism Act 2000, as amended, establishes several offences about engaging in or facilitating terrorism, as well as raising or possessing funds for terrorist purposes. It establishes a list of proscribed organisations the Secretary of State believes are involved in terrorism.
The Terrorism Act applies to all persons. There is also a failure to disclose offence and tipping off offences for those operating within the regulated sector.
The Money Laundering Regulations 2007 repeal and replace the Money Laundering Regulations 2003 and implement the third European Union money laundering directive. They set administrative requirements for the anti-money laundering regime within the regulated sectorand outline the scope of .
The regulations aim to limit the use of professional services for money laundering by requiring professionals to know their clients and monitor the use of their services by clients.
The regulations apply to persons acting in the course of businesses carried on in the UK in the following areas: