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In 2015 the updated Funds Transfer Regulation (FTR) was published. Also known as the Wire Transfer Regulation (WTR) and the Travel Rule, it is a subset of European legislation that supports efforts to combat money laundering and terrorist financing. The requirements have been onshored (and amended) into UK legislation as MLR 2019.(1)
The FTR sets out required payer and payee information to accompany a payment. It is a foundational control over payment information quality and a key anti-money laundering and counter-terrorist financing measure. All payment service providers (PSPs) within the UK are subject to FTR as are PSPs sending payments to or from the UK.
Non-compliance may leave your organisation vulnerable to money laundering and terrorist financing threats as well as sanctions evasion, and you may be reported to the Financial Conduct Authority (FCA).
What you need to do
Conduct a FTR risk assessment to identify and assess the risk of money laundering and terrorist financing associated with payments. Risk factors for consideration should include, but not be limited to:
Whether the payment is domestic or cross-border.
The risk profile of your customers (e.g. number of high-risk customers such as politically exposed persons (PEPs), ultimate beneficial owners (UBOs) etc.).
The countries or geographic areas where payments are originating from.
The type of payment instrument used.
The number of intermediary PSPs used in payment chains and their jurisdictions.
Your risk assessment should also consider the steps you have taken to mitigate the risks of money laundering and terrorist financing related to FTR that your organisation faces.
Implement systems, policies, controls and procedures to address FTR risks and meet the requirements under the MLR 2019. You must establish and maintain written policies, controls and procedures to manage and mitigate the money laundering and terrorist financing risks identified in your FTR risk assessment. These must be proportionate to the size and nature of your business. The FCA expects all PSPs to have effective risk-based procedures that apply where payments lack the information needed on the payer or the payee.
Provide training to staff. You need to provide staff with appropriate training on FTR including where it is relevant to the implementation of the MLR 2019.
Make sure your record keeping meets FTR requirements. You need to retain all FTR-related information for a five-year period. Unless otherwise required, records should be deleted after the five-year period.
Notes
(1) The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLR 2019) came into force on 10 January 2020. These regulations implement the EU Fifth Money Laundering Directive (Directive (EU) 2018/843, '5MLD')) in the UK. The Regulations make amendments to the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
Download our free guide to UK Funds Transfer Regulation.
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