Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)

I beg to move that the Committee considers this package of changes to the money laundering regulations. They are aimed at improving the effectiveness of the UK’s anti-money laundering and counter-terrorist financing regime. The money laundering regulations sit at the heart of the UK’s preventive, risk-based approach to tackling illicit finance. They ensure that the UK’s modern and open economy cannot be exploited by criminals seeking to hide the proceeds of their crimes. By requiring banks and other regulated businesses to take reasonable, proportionate steps to detect and prevent money laundering and terrorist financing, the regulations protect the integrity of the UK’s financial system. However, as new technologies emerge and criminals find new ways in which to launder illicit funds, the regulations must evolve with them. The changes before the Committee represent a significant update to the regime. They ensure that the regulations are focused on the highest-risk activities and threats to the UK system, while closing loopholes and making the regime clearer and easier to use. This SI reflects the Government’s determination to ensure that regulations strike the right balance between managing risk and enabling growth, as set out in the modern industrial strategy and the regulation action plan published last year. These changes are part of a broader push under the economic crime plan 2023 to 2026 to build a more effective system that turns the tide on dirty money, including major changes that the Government are making to improve our anti-money laundering supervision regime. Progress is already being made. In the year ending December 2025, there were 8,486 prosecutions for money laundering as a principal or non-principal offence, a 19% increase compared with the previous year. In the year ending March 2025, £285 million of criminal assets were recovered, a 15% rise compared with the previous year, with £47 million in compensation paid to victims out of confiscation order receipts—a six-year high. I am aware that the Secondary Legislation Scrutiny Committee raised concerns about the timeliness of this legislation in its 57th report. I am grateful to the committee for its input. However, it is important to recognise the complex nature of some of the measures in the SI. Following the public consultation, further technical discussions with industry and anti-money laundering supervisors were necessary on a number of measures, including in relation to bank insolvency, pooled client accounts and crypto assets. I know the Committee will appreciate the importance of getting the drafting right first time to avoid unintended consequences. This SI consists of measures on four core themes: making customer due diligence more proportionate and effective; strengthening system co-ordination; closing gaps in coverage; and reforming registration requirements for the trust registration service. There are also additional minor and technical changes that serve to improve consistency and ensure the UK complies with the standards set by the Financial Action Task Force, the global standard setter on anti-money laundering. I turn first to the measures on customer due diligence. These aim to ensure the checks required on customers are proportionate to the risks. This includes the removal of the requirement for regulated businesses to apply enhanced due diligence checks on countries listed by the Financial Action Task Force as jurisdictions under increased monitoring. These are countries found by the FATF to have strategic deficiencies in their regimes. The FATF does not require these checks, and permitting more flexibility here recognises that being linked to a listed jurisdiction does not automatically make a customer high risk. The Government estimate that this change alone will generate savings of £178 million per year for regulated firms, which can then be reinvested in higher-value compliance activity that identifies genuinely suspicious activity. Other changes on customer due diligence include important measures to increase the availability of pooled client accounts for businesses with a legitimate need, and to facilitate continued access to banking services for customers in the event of a banking insolvency. I turn to the system co-ordination. The SI makes changes to strengthen co-operation and information-sharing between anti-money laundering supervisors and other public bodies such as Companies House, which plays an increasingly integral role in the UK’s defences against illicit finance. To close gaps in coverage, the SI brings the activity of selling off-the-shelf firms within the scope of regulated activities. The SI also makes changes to ensure owners of crypto asset firms do not escape fit and proper checks by the Financial Conduct Authority. I turn finally to the trust registration service. The SI makes a number of changes to close loopholes that could be leveraged to obscure asset ownership, improve transparency of beneficial ownership of trusts with significant UK connections and refine registration requirements for other types of trust. The implementation of these measures will be swift, with the majority of measures coming into force 21 days after the SI is made. There are limited exceptions to this, such as for the measures on crypto assets, where a longer implementation period is necessary to give regulated businesses sufficient time both to adjust their systems and processes and to align with the introduction of the new financial services regulatory regime for crypto assets, which will come into force in October 2027. Safeguards have been built into the SI to mitigate risks in the interim period. In conclusion, these regulations strengthen the UK’s defences against illicit finance by better targeting high-risk activity and closing loopholes in the regime. I beg to move.