UK drafts changes to Money Laundering Regulations

The UK Government has shared draft legislation amending the Money Laundering Regulations, including changes to cryptoasset regulation, customer due diligence and trust registration. HM Treasury invites feedback by 30 September 2025.

Amendment regulations

Earlier this year HMT responded to its 2024 consultation on changes to the MLRs. It has now published draft amendment regulations.

According to the Government, these introduce targeted amendments to deliver a more proportionate regime, close regulatory loopholes and respond to new risks in relation to money laundering and terrorist financing.

New change in control threshold for crypto firms

The draft amendment regulations confirm that the threshold for the change in control regime for cryptoasset firms is going to be set at 10%.

The UK is currently developing a new financial services regulatory regime for cryptoassets under the Financial Services and Markets Act (FSMA). In the meantime, UK cryptoasset exchange providers and custodian wallet providers must register with the Financial Conduct Authority and comply with the MLRs.

Once the FSMA regime is in place, authorised cryptoasset firms will no longer need to register separately under the MLRs. However, some crypto firms that fall outside the FSMA regime will still need to do so. For these firms, the draft amendment regulations lower the threshold to notify the FCA of changes in their ownership structure from 25% to 10%. This change will take effect once the FSMA regime starts to apply.

HMT says that this move is to align with the FSMA regime, effectively confirming that the threshold for changes in control for authorised cryptoasset firms will also be set at 10%.

Correspondent relationships

The draft amendment regulations seek to restrict crypto firms’ use of correspondent relationships. They:

• require registered crypto firms to apply EDD to correspondent relationships, including assessing the non-UK correspondent firm’s AML controls, and
• ban crypto firms from entering into correspondent relationships with shell banks.

The draft amendment regulations also require crypto firms to take enhanced measures to ensure they do not enter into a correspondent relationship with firms that are known to allow its accounts to be used by a shell bank.

Customer due diligence

The draft amendment regulations update the scenarios which require enhanced due diligence (EDD) when onboarding customers. Most notably, they:

• narrow the definition of “high-risk third countries” to those on the call for action list set by the Financial Action Task Force (i.e., to those on the FATF ‘black’ list only), though firms will still need to consider whether there is otherwise a high risk of money laundering in considering whether to apply EDD, and
• in relation to complex and large transactions, they clarify that EDD is only needed on “unusually complex or unusually large” transactions.

Trust registration

The draft amendment regulations expand the categories of trusts required to register on the Trust Registration Service. They also introduce new exclusions for low-value trusts and trusts related to estates administration. 

Other changes

Other changes made by the draft amendment regulations include:

• converting monetary thresholds from euros to sterling, and
• clarifying that reinsurance activities are not subject to requirements that apply to insurance undertakings.

Next steps

HMT invites comments on errors, ambiguities, or unintended consequences by 30 September 2025. It expects to lay the amendment regulations before Parliament in early 2026.

The Government also plans to update sectoral guidance and release new guidance on the use of digital identity verification.