Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025

Considered in Grand Committee

16:10:00

Moved by

That the Grand Committee do consider the Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025. Relevant document: 27th Report from the Secondary Legislation Scrutiny Committee

My Lords, before I address the content of this statutory instrument, I will briefly provide some background. The fight against money laundering is an important element of the Government’s missions to deliver safer streets and kick-start economic growth. This year marks the 10-year anniversary of the public/private partnership which is central to the UK’s response to economic crime and which sets the international standard in this area. With approximately 1,200 UK law enforcement operations supported, over 400 arrests made, nearly £250 million seized and restrained and more than 100 alerts published, the partnership demonstrates the power of a whole-system response which combines the capabilities, resources and expertise of the public and private sectors. However, with the threat ever evolving, we must target our resources to where they will have the greatest impact. Under the economic crime plan 2, the Government, law enforcement and the private sector have worked together to consider how public/private resource can be better directed to maximise our collective impact against the threat. The statutory instrument before the Committee today is one of the first outputs from this work. Quite simply, it raises the existing financial threshold for two exemptions which apply to principal money laundering offences under the Proceeds of Crime Act 2002 from £1,000 to £3,000. The aim is to move finite resource away from low-value activity towards higher-value investigations and to increase the effectiveness of the suspicious activity reporting regime. This uplift in the threshold will enable law enforcement resource to focus on higher priority reports that provide greater opportunities for asset denial and disruption of criminal activity. The proposal before the Committee today will also free up business resources which can be redirected towards high-value activity that may have a greater impact on the threat. The measure is further expected to reduce the impact on banking customers by reducing the number of instances of legitimate customers being unable to access their accounts, particularly where no further action is taken. The first exemption applies to acts in operation of account, such as paying expenses, by deposit taking bodies—in essence, banks and building societies—and to electronic money and payment institutions. The second exemption applies in the instance of a business in the anti-money laundering regulated sector ending a relationship with a customer and paying away any money or property to the customer. This means that for transactions below this threshold, businesses in the anti-money laundering regulated sector do not need to submit defence against money laundering suspicious activity reports, or DAML SARs as I will refer to them. A DAML SAR is submitted to the UK Financial Intelligence Unit by a person proposing to deal with suspected criminal property which may make them liable for one of the principal money laundering offences under the Proceeds of Crime Act 2002. By submitting a DAML, a person can avoid committing one of the principal money laundering offences by obtaining consent or deemed consent for the act they propose to carry out; for example, as I mentioned earlier, a customer’s transaction to pay their mortgage. The DAML provides information to the UK Financial Intelligence Unit and prevents the business carrying out the activity referenced in the request until the UK Financial Intelligence Unit gives a consent decision, or seven working days pass, after which businesses can assume they have consent. In 2023, the threshold was raised to £1,000 due to the rising volume of DAML regulation procedures, and the regulatory burdens on businesses to submit a DAML suspicious activity report, as well as burdens on law enforcement to review and the delay to customers who must often wait seven days for their transaction to process. Those are all good reasons why the original threshold was raised to £1,000.

16:15:00

Although the £1,000 threshold has likely contributed to a reduction in DAMLs, evidence shows that the UK Financial Intelligence Unit continues to receive a large number of low-value items, only a small proportion of which lead to asset denial opportunities. For example, between January and December 2024, approximately 23,000 DAMLs relating to transactions between £1,000 and £3,000 were submitted. Of these, only 182 were refused, equating to 0.1% of all assets denied because of the DAMLs in that year.

That is why, backed by industry and law enforcement partners, we are now raising that threshold to £3,000. The requirement for businesses to submit an information only suspicious activity report to the UK Financial Intelligence Unit where they suspect any and all involvement in money laundering remains unaffected—I hope that will help the noble Lord in his response—meaning that this information will still be provided as now.

Having covered those key points, I confirm the Government’s commitment to tackling money laundering and note that this instrument forms part of the ongoing efforts in that important area. I commend the small changes in the order to the Committee.

My Lords, I am sure that all parliamentarians will agree that tackling money laundering is a shared mission across both Houses to create a safer society and support our economy. I am proud that the previous Conservative Government introduced the economic crime levy, which raises some £100 million per year from the anti-money laundering sector. I am pleased that today’s proposals build on this legacy of tackling money laundering. These proposals will raise the threshold for two exemptions that apply to principal money laundering offences under the Proceeds of Crime Act 2002 from £1,000 to £3,000. This will reduce the resourcing burden on law enforcement and enable our officers to dedicate more time to activities that yield greater asset denial and to disrupting criminal operations more effectively. If we look at the number of defence against money laundering reports submitted to the UK Financial Intelligence Unit in 2024, we can see why there is a case for raising the threshold. In 2024, 23,000 reports were submitted relating to transactions between £1,000 and £3,000. Of these, only 182 were refused, leading to £209,565 of assets denied. This represents 0.1% of all assets denied as a result of defence against money laundering reports in 2024. It is both necessary and appropriate that we ease the pressure on enforcement agencies at this level and allow resources to be focused where they can have the greatest impact on tackling the most serious crimes. This policy area has been under review following the threshold rise in 2023, and a targeted consultation was carried out on money laundering reports. The outcome of the consultation shows strong support for increasing the threshold to at least £3,000. Respondents cited multiple benefits, including a reduction in the reporting burden, the reallocation of resources to higher-value investigations, and improved outcomes for customers, particularly by reducing the number of legitimate account users who face access issues. Raising the threshold to £3,000 is supported by the UK Financial Intelligence Unit, which believes it will also reduce the reporting burden on business and free up its resources to focus more on high-value activity. Although the case is clear to raise the threshold, the Government must also be aware of the potential risks of criminals splitting transactions to come under the threshold. This was raised by a respondent in the consultation. Although mechanisms are in place, this must be a consideration. I ask the Minister to confirm that crime rates under that £3,000 level will be monitored and that the threshold will be changed again if it becomes necessary. In conclusion, I support today’s proposals, which will help to tackle money laundering. There is no place for crime groups attempting to launder their illicit funds through the UK financial system. It is right that we prioritise resourcing for the highest crimes.

I am grateful to the noble Lord, Lord Davies, for having a shared approach to money laundering. He is right to point to the fact that there has been a consultation on this matter. He is also right to point out that, in essence, there is a shared understanding between all parties that the money laundering threshold needed to be reviewed. The figure of £3,000 that we have put in this order sets a balance. We will always keep it under review—there is potential for higher figures, which have been discussed as part of the consultation—but we have settled on a threshold of £3,000, which strikes the appropriate balance between reducing low-value reporting and mitigating the potential loss of asset denial outcomes. The noble Lord is right to say that we need to ensure that we examine the risk of criminals splitting transactions into smaller amounts and seeking to avoid detection. The raising of the threshold is data led. It addresses an acute consumer duty risk and creates capacity in firms to tackle higher-value, more societally impacting economic crimes, all of which outweighs the residual risk of criminals circumventing the threshold limit as of now. The noble Lord was right to point to the very low level of transactions of interest between £1,000 and £3,000 in the previous regime, which resulted in further examination. I am grateful to the noble Lord for his support. I can assure him that we will keep all matters under review, including the performance of this threshold, but I take and welcome his considered support. I commend the order to the Committee.

Motion agreed.