Draft Money Laundering Regulations 2025

In September 2025, HM Treasury published the Draft Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (the Draft SI), alongside a policy paper. These proposals follow a public consultation and are intended to improve the effectiveness of the UK’s Money Laundering Regulations (MLRs). The focus is on closing regulatory loopholes, improving proportionality and overall responding better to evolving risks in financial crime.

The draft SI represents a broader shift towards a more targeted, risk-based approach to anti-money laundering (AML) compliance. This article will consider the amendments and how they can affect businesses.

Enhanced Due Diligence (EDD)

EDD requirements have been narrowed to apply only to jurisdictions listed on the Financial Action Task Force (FATF) “call for action” list, which removes the broader obligation to apply EDD to countries under “increased monitoring”. This will allow firms to focus resources on the highest risk jurisdictions.

EDD will be only required for transactions that are unusually complex or unusually large, relative to the nature of the deal or what is normal for the sector. This is intended to reduce unnecessary compliance burdens.

Customer Due Diligence (CDD)

The draft regulations ensure consistency in relation to transaction-based CDD requirements across non-financial sectors. Letting agents and art market participants will now follow similar CDD triggers to those used by high-value dealers. This change is designed to make customer due diligence more proportionate and effective.

Pooled Client Accounts (PCAs) decoupled from Simplified Due Diligence (SDD)

The Draft SI has decoupled PCAs from SDD. This means that the SI removes the presumption that PCAs are low risk or limited to AML/Counter Terrorist Financing regulated customers, but banks must still apply risk-based controls.

Financial and credit institutions are now required to take reasonable measures to understand the intended use of a personal current account (PCA), gather adequate information about the customer’s business activities, and evaluate the associated risks. Banks must seek additional details and consider implementing further controls on the PCA to effectively manage those risks.

PCA holders must also be able to identify whose funds are held in the account if requested.

Bank insolvency onboarding exception

To ensure continuity of banking services during insolvency events, credit institutions may onboard customers from insolvent banks before completing identity verification. This is allowed where:

• Verification is completed as soon as reasonably practical.
• The FCA is notified.
• The customer is not subject to EDD.

This exception is designed to keep AML safeguards while enabling access to banking services during an insolvency event.

Cryptoasset Firm Regulation

The draft SI aligns cryptoasset firm requirements with the Financial Services and Markets Act 2000 (FSMA).

Key changes include:

• Updating the fit and proper person test to match FSMA.
• Aligning thresholds for pre and post FSMA regimes.
• Removing the need for dual registration under the MLRs for FSMA authorised firms.

Trust Registration Service amendments

The draft regulations intend to improve the transparency of beneficial ownership. Changes include:

• Closing loopholes that may be used to obscure asset ownership.
• Removing automatic registration triggers based solely on Stamp Duty Reserve Tax liability.
• Introducing exclusions for low-value or estate-related trusts.

The draft regulations aim to enhance the effectiveness of the Trust Registration Service by closing loopholes that may be used to mask asset ownership. It intends to improve transparency relating to the beneficial ownership of trusts with strong UK ties and to clarify registration obligations for other categories of trusts.

Proposed further MLRs amendments

• Revising exemptions for overseas sovereign wealth funds
• Reinsurance contracts not subject to AML requirements to be in place for direct insurance providers.
• Crypto asset exchange providers/custodian wallet providers to apply enhanced due diligence in relation to correspondent relationships.
• Amendment of the MLRS to require FCA-supervised money service businesses and trust or company service providers to notify the FCA of any inaccuracies in previously submitted information.

Next steps

The consultation closed on 30 September 2025, and the final regulations expect to be laid in early 2026 and will come into force 21 days after being made, with specific provisions for cryptoasset firms aligned to the commencement of the FSMA cryptoasset perimeter.