I beg to move,

That the Committee has considered the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026.

It is an honour to serve under your chairship, Mr Betts. The draft regulations aim to improving the effectiveness of the UK’s anti-money laundering regime. Money laundering is not a victimless crime. It fuels serious organised crime that damages our high streets and ruins the lives of people who fall victim to fraud, human trafficking and the drugs trade. It undermines the UK’s reputation as a safe and secure place to do business and, in doing so, undermines the interests of legitimate businesses.

As new technologies emerge and criminals find new ways to launder illicit funds, the Government are taking action to turn the tide on dirty money. This includes a new high street organised crime unit, which is being set up by the National Crime Agency, backed by £30 million of additional funding over the next three years. It will target cash-intensive businesses, such as barbershops, vape stores, mini-marts and sweetshops, which are exploited by criminal groups to conceal their activities.

The draft regulations represent a significant update to the money laundering regulations, which require financial institutions and other regulated businesses to take measures to avoid being used by criminals to launder the proceeds of crime, and to ensure that any attempts to do so are detected and flagged to law enforcement. They will make a number of changes to ensure that regulatory requirements are proportionate and risk-based, while closing loopholes and making the regime clearer and easier to use. This reflects the Government’s determination to build a more effective anti-money laundering system, sitting alongside the major reforms announced last year to our anti-money laundering supervision regime.

The draft regulations consist of measures on four core themes: making customer due diligence more proportionate and effective; strengthening system co-ordination; closing loopholes in coverage; and reforming registration requirements for the trust registration service. They will also make minor and technical changes to improve consistency and ensure that the UK complies with the standards set by the Financial Action Task Force, the global standard-setter on anti-money laundering.

First, the measures on customer due diligence aim to ensure that 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 FATF 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 the Government expect that permitting more flexibility here will enable firms to focus their scrutiny on the most serious risks to the UK, as set out in the latest national risk assessment of money laundering and terrorist financing. 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 bank insolvency.

I turn to system co-ordination. The draft regulations will make 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 draft regulations will bring the activity of selling off-the-shelf firms within the scope of regulated activities. They will also make changes to ensure that owners of cryptoasset firms do not escape fit and proper checks by the Financial Conduct Authority.

Finally, I turn to the trust registration service. The draft regulations will make a number of changes to close loopholes that would be leveraged to obscure asset ownership; to improve transparency of beneficial ownership of trusts with significant UK connections; and to refine registration requirements for other types of trust.

In summary, the draft regulations contain measures to build a stronger, more risk-based and therefore more effective anti-money laundering regime. I commend them to the Committee.

I welcome the Minister to her new role. As she has set out, the draft regulations will make targeted changes to the UK’s money laundering regime, which is central to efforts to fight economic crime and terrorist financing. Since its introduction, there have been various changes underpinned by the international standards to which the Minister referred. The consultation on improving the regulatory system and the effectiveness of the money laundering regulations began under the last Conservative Government, so I am happy to confirm to the Minister that the Opposition will support the draft regulations. However, I have some questions to which I would be grateful for a response.

The draft regulations will amend the customer due diligence and enhanced due diligence provisions so that they apply to “unusually complex” rather than just “complex” transactions, as well as to “unusually large” transactions. They will replace the broader grey list of “high-risk third countries” with the tighter “Call for Action” black list, so that North Korea, Iran and Myanmar are automatically covered. However, Syria and Yemen, for example, will no longer be covered. We support a risk-based proportionate approach, but what reassurance can the Minister provide that this change will not undermine efforts to tackle illicit finance?

This is a rare example of deregulation from this Government. Having sat in a Committee Room going through 536 pages of the last Finance Bill, I simply say, “More, please!” Given the Government’s warning that firms may respond with overly cautious gold-plated compliance, what steps are being taken to ensure that the savings of £178 million a year to which the Minister referred will be realised?

Where a bank goes insolvent, the draft regulations will allow accounts to be opened for transferred customers before full due diligence is complete, with checks being carried out “as soon as practicable”. That makes sense, as we saw with Silicon Valley Bank. However, the Treasury recognises in its explanatory memorandum that this measure does not deal with all the associated issues. How will the Minister and the Government deal with those issues?

On crypto, the draft regulations align with the Financial Services and Markets Act 2023 reforms, which is welcome, to apply due diligence checks. I note that the draft regulations will allow for a nine-month implementation period before those obligations apply. In a fast-moving sector, is the Minister confident that that will not open a window of vulnerability? How are the Government engaging with the sector to ensure that it is ready for these changes?

On trusts, the changes will both expand and narrow the trust registration service. Given the complexity in this area, and the Government’s admission that previous rules missed some trusts, how will HM Revenue and Customs prevent sophisticated actors from structuring around the rules, while ensuring that smaller, legitimate trusts can comply?

The draft regulations will explicitly require agents to carry out due diligence when selling off-the-shelf companies. The quantitative data on the prevalence and misuse of those companies is limited, since neither Companies House nor HMRC systematically tracks that activity, so there is a clear gap in the data. I appreciate that for that reason the Minister will not be able to provide an exact figure, but does she have an estimate of how widespread the abuse is around the tens of thousands of companies, if not more, that are registered each year?

As a result of the changes, the Government estimate that £1.5 billion-worth of net benefits will be delivered over the next 10 years, but the impact assessment, which I am sure all hon. Members have studied closely, makes it clear that much of the evidence is qualitative and that the costs have not been robustly quantified. The Treasury has not attempted to monetise some of the proposals to provide a broader analysis of the impact. Colleagues who served on the last Finance Bill Committee will be aware of the interest that the Opposition take in impact assessments. Can the Minister explain why more of the benefits that are supposed to come from these regulations have not been monetised in the way the due diligence checks have? How confident is she that they will deliver the promised savings over the next decade?

Finally, the Minister will know that when changes of this magnitude come in, they affect the sectors involved and the 95,000 companies that will be required to carry out some or all of these checks. They are looking for clear guidance to help interpret the regulations. Perhaps she could give an indication as to when such guidance will be provided to the sector.

As I say, we launched the consultation on changing the regulations, and we support the direction of travel, but I hope the Minister will be able to address some of my points.

I thank the hon. Member for North West Norfolk for his analysis and for his support for the draft regulations. I am grateful to him for saying that he hopes I will be able to address some of his points, because I wrote down all nine themes. Whether I can address them all as fully as I would like, I am not sure.

I am glad that he raised the Financial Action Task Force list, because I have spent some time over the past few days considering its impact. He is absolutely right to probe on the justification and the approach that will be taken. Some countries on the FATF increased monitoring list are recognised as presenting regional more than international risks, perhaps due to the lack of a specialist in the internationally facing financial sector or due to strict currency controls. The FATF recommends mandatory enhanced due diligence only for countries on the separate “Call for Action” list, which the hon. Member highlighted. That will mean that there is still an opportunity for enhanced due diligence, but the focus will be on those countries that are mandated by the Financial Action Task Force. This is an area for continued scrutiny, and that is something that I will do.

The hon. Member asked about the realisation of savings. Those savings were estimated in terms of the sector, and there is an expectation that it is the sector that will focus on delivering them.

A bank insolvency is obviously a very unusual event, and we are putting in place the appropriate measures to respond to that. The timing of the approach to crypto and vulnerabilities will relate to changes in controlled provisions; I believe that they will come into force for crypto firms on 25 October 2027, which will coincide with the introduction of new financial services regulatory regimes for cryptoassets.

I will come back to the hon. Member on the estimated impact and the evidence base for off-the-shelf companies. He asked for further information about the impact assessment and why more benefits cannot be monetised; I hope that he will accept a written response.

I am confident that the draft regulations will take us further forward in tackling money laundering.

Question put and agreed to.