Background
HM Treasury (HMT) recently published a draft statutory instrument (SI), The Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025, alongside a policy note (Policy Note), for technical consultation.
This follows HMT's March 2024 consultation on improving the effectiveness of the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), with the UK government's response published in July 2025.
The draft SI proposes targeted amendments to the MLRs and related legislation to address concerns identified in the March 2024 consultation.
Cryptoasset Businesses
Registration
The draft SI proposes changing the registration and change in control thresholds for cryptoasset businesses to align with the thresholds in the Financial Services and Markets Act 2000 (FSMA).
Currently, the UK Financial Conduct Authority (FCA) evaluates the applicant's "beneficial owners" when determining fitness and propriety. Under the proposals, the fit and proper test will be amended to require the FCA to assess whether the applicant's "controller" (as defined in Section 422 of FSMA) is a fit and proper person. This will commence when the forthcoming FSMA cryptoasset authorisation regime comes into force. However, it would not apply retrospectively – i.e., the FCA would continue to apply the fit and proper test to a beneficial owner where the cryptoasset business was registered under the MLRs before the new FSMA regime and the FCA is considering cancelling the registration under the MLRs.
The broader "controller" definition captures not only those with significant ownership stakes but also anyone who can exercise meaningful influence over the firm's management. This prevents individuals from evading fit and proper assessments through complex ownership structures that could otherwise allow bad actors access to UK markets.
Change of Control
The proposed Schedule 6B of the draft SI creates distinct change of control requirements based on whether the cryptoasset businesses register with the FCA under the MLRs before or after the FSMA cryptoasset authorisation regime comes into force:
- Pre-regime registered cryptoasset businesses. Beneficial owners, those who hold 10% or more of shares or of the voting power or can exercise significant influence over the management of the cryptoasset business must notify the FCA for change of control. This expands the persons required to give notice to the FCA for change of control.
- Post-regime registered cryptoasset businesses. The category of persons required to give notice to the FCA for change of control aligns with the FSMA controller definition, aligning these businesses with the broader authorisation framework.
This dual approach ensures continued oversight during the transition period while eliminating duplicative registration requirements once firms move to FSMA cryptoasset authorisation.
Enhanced Due Diligence
In a significant shift, the draft SI proposes to narrow the trigger for country-related enhanced due diligence (EDD) from all "high-risk third countries" (i.e., Financial Action Task Force (FATF)'s "increased monitoring" and "call for action" lists) to only the countries on FATF's "call for action" list. This focuses resources on the highest risk jurisdictions and implements a more targeted risk-based approach.
The draft SI also clarifies that EDD is now required only for transactions that are "unusually complex or unusually large" relative to sector norms. This seeks to address the over-application of EDD to routine transactions.
Pooled Client Accounts
Responding to restricted access concerns, the draft SI decouples pooled client accounts (PCAs) from the simplified due diligence framework. Firms must assess each PCA's risk independently, take reasonable measures to understand its purpose and be able to identify underlying clients, when requested.
Bank Insolvencies
The draft SI allows credit institutions to onboard customers from insolvent banks before completing identity verification, provided such verification occurs as soon as practicable and the FCA is notified. This seeks to ensure the continuity of banking services during insolvency events without compromising regulatory standards.
Trust Registration Expansion
HMT proposes to expand the Trust Registration Service to capture additional trusts with UK property connections. Under the draft SI, trusts that acquired UK land before 6 October 2020 would need to register if they continue to hold that property.
The amendments would further introduce new exemptions for low-value trusts (i.e., under £2,000 in assets or £10,000 cumulative property value) and those related to estate administration within two years of death.
Additionally, stamp duty reserve tax liability would no longer automatically trigger registration requirements, simplifying compliance for affected trustees.
Next Steps
The consultation closes on 30 September 2025. Subject to feedback, the final SI is expected to be laid before Parliament in early 2026 and will take effect 21 days after being made. Provisions relating to cryptoasset businesses will align with the FSMA cryptoasset perimeter implementation.
The draft SI and Policy Note are available here and here, respectively.
James Wells, trainee in the Financial Markets and Funds practice, contributed to this advisory.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
