Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the risk posed by illicit finance to the electronic money sector.

The government is taking a robust and proactive approach to reducing the illicit finance risks in the electronic money (e-money) sector. E-money institutions are already subject to regulation and supervision by the Financial Conduct Authority (FCA) under the Electronic Money Regulations 2011 and The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

In December 2020, the government published the UK’s third National Risk Assessment (NRA) of Money Laundering and Terrorist Financing, which found that e-money services are at medium risk of money laundering. The NRA also noted the appeal of UK e-money institutions to money launderers looking to move illicit funds in and out of Russia and Eastern Europe.

The Financial Conduct Authority (FCA) is already taking steps to ensure firms operating in the sector have robust anti-financial crime controls, and has a number of powers at its disposal – including to request information, inspect a firm’s premises and, where necessary, to withdraw an firm’s registration – that can be used to ensure firms’ systems and controls are effective.

UK law enforcement and the Financial Conduct Authority have also conducted assessments of the money laundering risks in the e-money sector and other technological enablers of money laundering. Whilst vulnerabilities remain, both have observed that e-money institutions generally have very well-developed live transaction monitoring and document verification processes.