RPC opinion: The Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 Statutory Instrument
Published 30 March 2026
漏 Crown copyright 2026
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The Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 Statutory Instrument Impact Assessment听
| Lead department | HM Treasury |
|---|---|
| Summary of proposal | The proposal听seeks听to听make the Money Laundering Regulations clearer, more proportionate, and better targeted at current and emerging risks. |
| Submission type | Impact assessment (IA) 鈥撎�18听November听2025 |
| Legislation type | Secondary |
| Implementation date | TBC |
| RPC reference | RPC-HMT-25105-IA(1) |
| Opinion type | Formal |
| Date of issue | 06听January 2026 |
1. RPC听opinion听
| Rating1 | RPC opinion |
|---|---|
| Fit for purpose | The IA provides sufficient evidence and analysis for the RPC to be able to听validate听the EANDCB. The assessment of impacts on small and microbusinesses is sufficient. The Department听has provided a听brief听cost benefit analysis,听that would听benefit听from monetising more of the identified impacts. |
| Department assessment | 搁笔颁听惫补濒颈诲补迟别诲 | |
|---|---|---|
| Equivalent annual net direct cost to business (EANDCB) | -拢172.1听尘颈濒濒颈辞苍 | -拢172.1听尘颈濒濒颈辞苍听听 |
| (2025听prices, 2025听pv) | 听 | 听 |
| Business net present value | 拢1,481.2听million | 听 |
| Overall net present value | 拢1,481.2听million | 听 |
2. RPC听summary听听
| Category | Quality2 | RPC comments |
|---|---|---|
| EANDCB | Green | The Department听has sufficiently听set out the assumptions, data, and calculations behind its estimates of the impact of the proposal,听based on reducing unnecessary compliance activity and associated costs for regulated firms,听as a result of听changing due diligence requirements for 鈥楬igh Risk Third Countries鈥�. |
| Small and micro business assessment听 | 听 | 听 |
| (SaMBA) | Green | The IA includes an adequate听SaMBA,听describing听the听possible听impacts听on听smaller businesses and sole traders, such as legal and accountancy professionals听that听could be affected.听The assessment听would听benefit听from discussing potential courses of mitigation听for听small and听micro听businesses. |
| Rationale and options | Satisfactory | The IA presents evidence from听a 2024 consultation which听identified听a variety of issues with听how听the current MLR system is听operating听to form the rationale for intervention.听The Department presents its preferred options听separately across a range of different measures, each听assessed against a 鈥楤usiness as Usual鈥� scenario.听The IA would听benefit听from听discussing听more听alternatives听options for some of the proposals. |
| Cost-benefit analysis | Satisfactory | The IA provides a听brief听cost-benefit analysis of the proposal to calculate the net present value (NPV) over a听10-year appraisal period. The assessment also does well to illustrate听many听of the un-monetised benefits qualitatively.听The IA could have听attempted听to monetise some of these to provide a broader quantitative analysis. |
| Wider impacts | Satisfactory | The IA provides a听satisfactory听assessment of the proposal鈥檚 impacts on听a range of wider issues, with a good discussion of the potential trade implications. The IA听would be improved听by considering the impact on the business听environment from the听package as a whole. |
| Monitoring and evaluation听plan | Weak | The assessment includes a听weak听M&E plan.听The Department does commit to听including the proposals in an ongoing periodic 5-year review process,听however听provides only brief detail on potential monitoring and evaluation activities. |
3. Summary of proposal听
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), alongside legislation such as the Proceeds of Crime Act (POCA), form a core part of the UK鈥檚 legislative framework for preventing and detecting money laundering and terrorist financing. The MLRs are underpinned by international standards set by the Financial Action Task Force (FATF),听of听which the UK is member. Since their introduction, the MLRs have been amended on several occasions to reflect evolving risks, changes to the international landscape, and lessons learned from supervision and enforcement.听听
Following a consultation in 2024 and听subsequent听policy development, the government is now bringing forward a package of 15 targeted measures through this SI. The intention is to close regulatory loopholes, clarify and update requirements, improve proportionality, and strengthen the overall effectiveness of the regime. The measures are designed to address specific weaknesses听identified听by stakeholders, support a more risk-based and outcome-focused approach, and ensure continued alignment with international standards.听听
The听proposed set of measures has been assessed against a 鈥楤usiness听As听Usual鈥� baseline scenario, with an NPV of听1,481.2m听(2025听prices, 2025听present value (pv) base year) over a听10-year appraisal period from 2024/25 to 2043/44.听The EANDCB is听-拢172.1m听(2025听price and听pv听year).听
4. EANDCB听
The IA鈥檚 evidence and analysis of direct impacts on business is听sufficient听and the RPC can听validate听the EANDCB figure presented.听
The听IA听helpfully听sets out听the potential听ways in which the proposed reforms may affect听businesses. These include a range of potential costs, such as听one-off costs to update internal procedures, training costs as staff familiarise themselves with changes, and minor administrative costs arising from new reporting and notification duties.听These are offset by benefits听such as听fewer duplicative compliance checks leading to lower administrative costs, low-risk trusts having streamlined processes, reducing unnecessary compliance burdens and greater regulatory clarity leading to lower ongoing compliance听costs.听The听assessment could be improved by听the inclusion of听potential familiarisation costs incurred by听businesses听as a result of听the overall package of measures, rather than only considering impacts听individually for each proposal.听
The听Department鈥榮听EANDCB听estimate is听-拢172.1m (2025听prices, 2025听present value (pv) base year) over听10 years, based听on听reducing unnecessary compliance activity and associated costs for regulated firms,听as a result of听changing due diligence requirements for 鈥楬igh Risk Third Countries鈥�.听This has been听calculated by听estimating the current total annual cost to industry of carrying out听Enhanced听Due听Diligence听(EDD)听on customers and transactions related to听鈥業ncreased Monitoring鈥� (IM)听countries,听before听assuming a听proportion听of these costs will be saved听due to reduced EDD activity.听The Department has听assumed听half of affected business will move from听EDD to Customer Due Diligence (CDD)听and that CDD is 56% of the cost of EDD.听The IA would听benefit听from听doing more to听justify听assuming听that savings will be听a midpoint听between total EDD and CDD costs.听
The听Department鈥檚听analysis of the potential direct impact听on businesses could be听improved by听monetising more of the identified costs and benefits.听Whilst this has been justified by听the lack of baseline data, the IA would听benefit听from greater听consideration听of costs such as the听transitional听familiarisation听costs of the听proposed measures.听The IA should also present the EANDCB estimate more clearly, rather than using the description听鈥楴et cost to business per year鈥�.听
5. SaMBA听
The Department has provided a听satisfactory听small and micro business impact assessment (SaMBA), with a听qualitative听assessment of how听smaller businesses听and sole traders, such as听legal and accountancy professionals could be affected.听Due to听limited听data availability, the听Department听has听not calculated听the number of small and micro businesses听in the sector, though does use听a听survey of MLRs-regulated firms听and data听held by the听Department听to give听an indication听of the potential scale.听The IA notes that听most of the measures introduced are likely to听benefit听small and micro businesses as they involve a reduction in regulatory requirements or a clarification to听existing requirements.听Some measures听could negatively听impact听small businesses, such as enhanced due diligence requirements for听cryptoasset听exchange providers,听the majority of which are small and micro.听The small and micro business impact has been considered further for some of the measures individually. The听IA would听benefit听from听considering in more detail the nature of affected businesses and听how measures will affect smaller businesses听relative听to larger ones.听
The Department has not exempted听small and听micro businesses from the proposed measures, as they are a听requirement听of the global Financial Action Task Force, which the UK听has committed to听comply with.听This justification is sufficient.听This could be improved听by the inclusion of听a discussion of听any听possible听mitigations听that听could apply听for measures that are expected to incur costs.听This听could include a discussion on how to manage any mismatch between supervisory expectations and realities of SMBs dealing with compliance obligations.听The听SaMBA听also could have been improved with听an听indication听of the potential听impact of the policy on听medium sized businesses.听
6. Rationale and options听
The IA鈥檚 rationale for intervention is based on evidence from听a听2024听consultation听which听identified听a variety of issues with听the current MLR system is听operating. These听weaknesses听include听regulatory loopholes, requirements needing clarification听and听disproportionate requirements.听The Department听has provided specific detail on the problem under consideration and听subsequent听rationale for intervening individually for each of the measures,听largely focussed听around听ineffective听regulations,听insufficient听clarity, high admin听burdens听and regulatory gaps.听The Department听should set out听its overall rationale for intervention to cover the whole package of measures in greater听detail.听The IA would also听benefit听from using the SMART framework to听more clearly describe the听objectives听of the proposals.听
The听Department presents two options, a 鈥榙o听nothing鈥櫶齜aseline scenario and听the听preferred听option听for each of the measures.听In addition to this,听for some of the proposals the Department has considered other non-regulatory alternatives to intervention.听The IA would听benefit听from justifying why further options were not considered for the rest of the proposals. The IA could also be improved by including听more background on policy development conducted by the Department.听
7. Cost听benefit analysis听
The IA听includes听a cost-benefit analysis听which sets out the potential听impact听of the proposed policy.听The only fully quantified measure however听is听the听enhanced due diligence on 鈥榗omplex or unusually large鈥� transactions鈥痮n businesses听policy.听听Assessed against a 鈥榙o听nothing鈥櫶齜aseline scenario,听this produces听an听estimated听NPV of听拢1,481.2m (2025听prices, 2025听present value (pv) base year) over a听10-year appraisal period.听This has been based on reducing unnecessary compliance costs for firms,听as a result of听reduced听due diligence requirements for 鈥楬igh Risk Third Countries鈥�.听听
7.1 Evidence听and听Assumptions听
The IA is based on a reasonable level of evidence.听The data and assumptions used in the听modelling听are based on听responses from the Department鈥檚 2024 consultation, along with听data from听annual anti-money laundering reporting and听the听2023-24 Economic Crime Levy听Report.听The assessment would听benefit听from听going into greater depth about how听survey responses have been used to produce specific quantified assumptions.听The Department does well to set out听details of the available evidence it has separately for each of the proposed measures.听
The IA helpfully provides a clearly defined baseline scenario separately for each measure, setting out clear assumptions for how the Department expects sectors to听operate听without intervention.听For many of the proposed interventions, despite setting out a range of data sources and analytical assumptions, these have not been used to produce听monetised estimates of the costs and benefits. This is particularly the case for the听CDD听triggers, EDD on complex transactions,听Trust Registration Services听measures听and听definition of insurance undertaking policies. The IA should do more to justify why it has not been possible to听use some informed assumptions to produce these estimates.听
7.2 Methodology听
The IA听only听features听a monetised analysis for one of the measures,听enhanced due diligence on 鈥榗omplex or unusually large鈥� transactions. As before, this has been estimated using the current total annual cost to industry of EDD, before assuming a proportion of these costs will be saved due to reduced activity. The IA does well to set out the听methodological听process used to produce this听estimated benefit, going through the relevant steps, data sources and assumptions used.听The assessment听usefully uses听lower and upper bounds听to illustrate the听potential uncertainty around听the estimated benefits, however this would be improved by听using this to听demonstrate听the potential variability in the assumptions that have been used, rather than assigning an arbitrary 25% range. This听could have been achieved using sensitivity analysis.听
8. Wider impacts听
The IA provides details on听the potential wider impacts of the proposed reforms.听This听includes听an assessment of the听trade implications for the package altogether.听The Department argues that the measures will improve听the competitiveness of UK firms by aligning requirements with the US and other听jurisdictions.听The听Department听does not expect any听new barriers to entry or discriminatory requirements for overseas businesses.听
The IA听helpfully considers the wider impacts of individual measures, considering issues such as听the听impact on innovation in the听crypto听sector, or听the听increased听ease of听doing听business due to听reduced CDD听requirements.听The IA would听benefit听from considering the impacts on the business environment for the entire package in addition to听assessing the measure individually, covering areas such as听competition,听investment听and innovation.听听
The IA also considers wider impacts such as on equalities,听consumers听and the public sector. As before, this would听benefit听from听a more consistent approach, along with being summarised听in the overarching evidence base for the intervention.听
9. Monitoring and evaluation plan听
The IA includes a听weak听monitoring and evaluation plan, with听periodic reviews of MLRs occurring every听5 years.听As the next review is set to occur in 2027, the Department should explain how it intends to听evaluate听the outcomes of the intervention听after such a short听timeframe.听The plan usefully includes a summary of data sources to be used听for听some of the听measures,听however this is very brief.听
The M&E plan听would be improved by considering听potential听evaluation questions it听seeks听to answer as part of the听review听process听and听what data听could听be used听for each of these,听in order to听determine听the success of the policy.听The听assessment could be improved by including a discussion of the potential unintended consequences of the proposed intervention and the potential effect of external factors, as well as how听the Department听could听respond to these issues.听
9.1 Regulatory Policy Committee听
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