Third Report Contents

Appendix 1: Correspondence: Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692)

Lord Trefgarne, Chairman of the Secondary Legislation Scrutiny Committee, to Stephen Barclay MP, Economic Secretary to HM Treasury

I am writing as Chairman of the House of Lords Secondary Legislation Scrutiny Committee which, at its meeting yesterday, considered a number of instruments including the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692). The Committee decided to draw this instrument, along with two other sets of Regulations, to the special attention of the House. Our Report will be published tomorrow and in it we express concern about two matters:

We would welcome your assurance that these lapses will not be repeated in the future.

12 July 2017

Stephen Barclay MP to Lord Trefgarne

Thank you for your letter of 12 July about your concerns in relation to the laying of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs). In particular, you highlighted that:

As you will know, the UK was legally obliged to transpose Directive (EU) 2015/849 (the Fourth Money Laundering Directive or 4MLD) by 26 June 2017. Meeting this deadline was also imperative in order to minimise uncertainty for businesses that had prepared for implementation on this date. Additionally, the related and interlocking Regulation (EU) 2015/847 (the Fund Transfer Regulation) took effect directly in UK law on 26 June. Delaying the implementation of 4MLD would therefore have created a fragmented and less effective anti-money laundering regime in the UK, and put the Government in breach of its legal obligations.

So as to ensure that our transposition of 4MLD was risk-based and proportionate, the Government consulted on both our policy intention (for eight weeks from September 2016) and on draft legislation (for four weeks from March 2017). Following these consultations, the Government intended to lay the MLRs on or before 5 June, so as to comply with the 21 day rule and ensure that Parliament would have sufficient time to consider the secondary legislation before it took effect. Regrettably, the dissolution of Parliament prior to the General Election on 8 June, meant that it was not possible to lay the MLRs within this timeframe. For the reasons set out above, the Government laid the MLRs as soon as possible after the election to meet our legal obligations and prevent uncertainty for industry.

Unfortunately, the Regulatory Policy Committee (RPC) process was also affected by the General Election. This meant that we did not have the final RPC opinion on our impact assessment by the time we laid the MLRs. We published this impact assessment as soon as possible once we received the RPC’s ‘fit for purpose’ opinion. This confirmed that the Government had done sufficient analysis on the costs and benefits of the MLRs (Impact Assessment found here: As you may be aware, the Government had previously published a draft impact assessment in September 2016 alongside the policy consultation on the implementation of 4MLD.

My officials have alerted me to a similar issue where the General Election purdah period has also had an impact on finalisation of the impact assessment for the implementation of the Payment Services Directive 2. The Government will shortly be laying the Payment Services Regulations 2017, which implement the Directive. Whilst a final impact assessment for implementation of the Directive has been submitted to the RPC, the Government will not be able to publish an impact assessment that has been through RPC scrutiny alongside the Regulations. The Government has taken the decision to publish without a final impact assessment to ensure industry and regulators have sufficient time to make the necessary changes required ahead of the Regulations coming in to force on 13 January 2018, with some aspects of the Regulations coming into force in August 2017 to support industry and regulators’ preparation, while ensuring sufficient scrutiny of the impacts by the RPC. The Government will publish an impact assessment once it has received a fit-for-purpose opinion from the RPC.

The Government does of course greatly value Parliamentary scrutiny of its policies. To demonstrate our commitment to observe this rule whenever possible, HM Treasury is part of the Cabinet Office capability work to improve Government handling of secondary legislation. We are introducing new prioritisation and planning processes over the summer which will minimise the chance of the 21 day rule being breached in the future. I am also pleased to let you know that, in my role as the Economic Secretary to the Treasury, I will be acting as the new Secondary Legislation Champion and will be monitoring the department’s performance and progress over the next few months.

I hope the above has gone some way to allay your concerns. Thank you once again for getting in touch.

17 July 2017

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