The anti-money laundering (AML) laws in the United Kingdom are a comprehensive legal framework aimed at preventing criminals from laundering illicit funds through the UK financial and property markets, professional services, and other sectors. These laws align with global standards set by the Financial Action Task Force (FATF) and are enforced through a combination of legislation, regulatory guidance, and supervisory oversight. The cornerstone of the UK’s AML regime is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), which have been amended multiple times to respond to emerging threats and improve effectiveness.
As of 2025, the UK government is actively reforming its AML framework to simplify compliance, enhance supervision, and introduce digital tools for better customer due diligence (CDD). These reforms reflect a strategic goal to maintain the UK’s status as a trusted global business hub while minimizing regulatory burdens.
Legal Framework and Key Legislation
Money Laundering Regulations 2017 and Amendments
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) constitute the primary legislation governing AML in the UK. These regulations implement key FATF recommendations and place duties on regulated firms and other obliged entities to:
- Establish risk-based systems and controls to prevent money laundering.
- Conduct customer due diligence (CDD) to verify customer identities and beneficial ownership.
- Monitor transactions for suspicious activity.
- Report Suspicious Activity Reports (SARs) to the UK Financial Intelligence Unit (UKFIU).
- Maintain records for a minimum of five years.
The 2017 regulations have been amended to tighten due diligence, clarify requirements around politically exposed persons (PEPs), and extend AML obligations within sectors such as real estate and letting.
Upcoming Reforms and Government Initiatives
The UK government has announced a package of reforms planned for implementation by the end of 2025 aiming to refine and simplify AML regulations. These reforms include:
- Reducing regulatory complexity while retaining robust safeguards against financial crime.
- Encouraging digital identity verification to streamline CDD and onboarding.
- Issuing clearer guidance tailored to different regulated sectors.
- Adopting a risk-based and proportionate approach, balancing compliance burdens and effectiveness.
- Expanding AML obligations to sectors like landlords and letting agents, who must now conduct identity checks and sanctions screening on tenants regardless of rent amount.
Scope of Application and Obliged Entities
Financial and Non-Financial Sectors
UK AML laws apply to a broad range of entities, often referred to as “regulated sectors” or “obliged entities,” including:
- Banks, building societies, and credit institutions.
- Accountants, auditors, tax advisers, and legal professionals.
- Estate agents and letting agents (with recent expansion).
- Trust or company service providers.
- High-value dealers and luxury goods traders.
- Crypto-asset service providers.
- Certain public bodies and professionals in relevant sectors.
This broad applicability is intended to close gaps through which criminals might seek to launder proceeds of crime.
Landlords and Letting Agents
A notable new development from May 2025 is the extension of AML compliance requirements to include all landlords and letting agents in the UK, regardless of rental value. This move aims to ensure that rental properties cannot be exploited for illicit financial flows. They must verify identities of tenants and landlords, conduct sanctions checks, and keep records for five years following tenancy termination. Non-compliance can lead to serious penalties, including fines and prison sentences of up to seven years.
Core AML Obligations and Controls
Customer Due Diligence (CDD) and Know Your Customer (KYC)
“Customer due diligence and know your customer are fundamental to the UK’s AML regime.”
Obliged entities must:
- Identify and verify the identity of customers and beneficial owners before establishing business relationships.
- Assess and classify risk profiles of customers.
- Apply enhanced due diligence to high-risk clients, including PEPs and those connected with high-risk third countries.
- Continuously monitor transactions and business relationships to detect suspicious activity.
CDD also includes verifying the source of funds where necessary to prevent layering and integration of illicit money into the financial system.
Politically Exposed Persons (PEPs)
The UK Financial Conduct Authority (FCA) has issued finalized guidance in 2025 on the treatment of PEPs, their relatives, and close associates to promote a risk-based, proportionate approach. Domestic PEPs are generally considered lower risk unless other risk factors are present. Firms must have senior management approval before establishing or continuing relationships with PEPs.
Reporting Suspicious Activity
Obliged entities must file Suspicious Activity Reports (SARs) with the UKFIU whenever they detect transactions or behaviors that may involve money laundering or terrorist financing. This duty is key to enabling law enforcement investigations and safeguards the financial system’s integrity.
Record Keeping and Data Retention
Entities must retain records of customer identities, transaction histories, and due diligence measures for a minimum of five years after the end of a business relationship. This supports audit trails, regulatory reviews, and criminal investigations. The records must also comply with GDPR requirements for data protection.
Internal Controls and Governance
ALL obliged entities are required to implement robust internal AML policies and procedures which include appointing a designated compliance officer, conducting risk assessments, providing employee training, and maintaining continuous monitoring and reporting mechanisms. Senior management is accountable for ensuring compliance and adapting controls to emerging risks.
Supervision and Enforcement
Regulatory Authorities
AML supervision in the UK is shared among several regulators depending on the sector:
- Financial Conduct Authority (FCA): Supervises financial firms, including banks and investment businesses.
- HM Revenue & Customs (HMRC): Oversees certain non-financial sectors such as estate agents and high-value dealers.
- Solicitors Regulation Authority (SRA): Regulates legal professionals.
- Office for Professional Body AML Supervision (OPBAS): Oversees the supervisors of the AML regime to ensure consistent standards.
Enforcement and Penalties
Failure to comply with AML laws can result in severe consequences including:
- Substantial fines.
- Business restrictions or license revocation.
- Disqualification of directors.
- Criminal prosecution leading to imprisonment, with maximum sentences up to seven years in serious cases.
Regulators have increasingly focused on proactive enforcement and sector-specific challenges, notably in legal and property markets.
Addressing New Risks: High-Risk Third Countries and Technology
Enhanced Due Diligence on High-Risk Jurisdictions
The UK MLRs require enhanced due diligence on clients and transactions involving high-risk third countries identified by the government, which includes broader checks and senior management approval for certain business relationships. The list of high-risk countries is regularly updated in line with FATF assessments.
Digital Onboarding and Technology Adoption
The government encourages the integration of digital identity verification tools and AI-powered transaction monitoring as part of the 2025 reforms. This modernization seeks to improve efficiency, reduce compliance costs, and increase the effectiveness of detecting illicit activities remotely.
Looking Forward: Future of UK AML Regulation
The UK’s AML framework is evolving towards greater clarity, proportionality, and technological innovation. The upcoming regulatory reforms aim to balance reducing administrative burdens with maintaining a strong defense against financial crime. Compliance duties will expand in some regulated sectors while becoming more streamlined through digital solutions.
This process reflects the UK’s ambition to remain a premier global financial center that is resilient against money laundering and terrorist financing threats.