UK Set to Remove Mandatory Enhanced Due Diligence for FATF Grey-Listed Countries in Major AML Reforms

Draft amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

• Have been approved by a House of Commons committee and
• Are about to be enacted, marking a significant shift toward a more proportionate, risk-based UK anti-money laundering (AML) regime.

The changes:

• Remove the duty for regulated businesses to apply enhanced due diligence (EDD) checks on countries listed by the international Financial Action Task Force (FATF) as subject to increased monitoring — the so-called "grey list" — because of strategic deficiencies in their AML regimes.

The FATF does not require these checks.

• Removing the mandatory requirement is expected to save regulated firms £178 million per year, according to the UK Treasury, freeing up resources for higher-value compliance work focused on genuine risks.

The reforms also update:

• Registration requirements for the Trust Registration Service (TRS),
• Closing identified gaps while introducing greater proportionality for low-risk trusts.

Key Elements of the Amendments

• Narrowing of jurisdiction-based EDD:
• Mandatory EDD will now be limited to the FATF's stricter "Call for Action" blocklist (currently including North Korea, Iran and Myanmar).
• The broader "grey list" of jurisdictions under increased monitoring will no longer trigger automatic enhanced checks, allowing firms to apply a more tailored, risk-based approach.
• Trust Registration Service reforms: The package refines TRS obligations, including
• Measures to improve transparency for trusts with significant UK connections,
• Remove Stamp Duty Reserve Tax as an automatic trigger for registration, and
• Introduce a de minimis exemption for low-value, low-risk trusts.
• Overall policy goal: The changes aim to
• Reduce unnecessary compliance burdens,
• Maintain full alignment with FATF standards, and
• Enable firms to focus scrutiny where it matters most on unusually complex or large transactions and the highest-risk jurisdictions.

The draft regulations:

• Were laid before Parliament in late March 2026 following technical consultation and were approved without division by the Fifth Delegated Legislation Committee on 3 June 2026.
• Are expected to come into force in the coming weeks (with some provisions, such as those relating to cryptoassets, having later implementation dates).

Impact

• Treasury officials have described the package as delivering a stronger, more effective AML regime better calibrated to actual risk, while delivering substantial cost savings for business.
• Regulated firms across financial services, legal, accounting, and trust/company service provider sectors are expected to benefit from reduced administrative costs.
• The Government has indicated that the savings should be reinvested in more effective, intelligence-led compliance rather than blanket de-risking.
• Industry bodies have welcomed the move as a pragmatic step that brings UK rules closer to FATF's own recommendations and reduces the risk of overly cautious "gold-plating" by firms.

Sources  

Primary Official Sources:

1. Hansard – House of Commons Delegated Legislation Committee Debate (3 June 2026) Full transcript of the debate on the Draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026, including statements by Economic Secretary Rachel Blake, details on the £178 million savings, EDD changes for FATF grey-listed countries, and TRS reforms. → https://hansard.parliament.uk/commons/2026-06-03/debates/08c0f288-924b-4622-ac2d-06601333604e/DraftMoneyLaunderingAndTerroristFinancing(Amendment)Regulations2026
2. Draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (Statutory Instrument) Official text of the draft regulations. → https://www.legislation.gov.uk/ukdsi/2026/9780348281743
3. Explanatory Memorandum to the Draft Regulations: Detailed policy rationale, including narrowing of EDD to FATF "Call for Action" list, TRS reforms (de minimis exemption, removal of SDRT trigger, etc.), and impact on businesses. → https://www.legislation.gov.uk/ukdsi/2026/9780348281743/pdfs/ukdsiem_9780348281743_en_001.pdf

Industry & Analysis Sources:

4. STEP News Digest (30 March 2026) – "UK AML regulations on trust registration amended" Early coverage focusing on the TRS elements of the package. → https://www.step.org/industry-news/uk-aml-regulations-trust-registration-amended
5. Regulation Tomorrow (27 March 2026) – "Draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026" Detailed summary of the draft SI and explanatory memorandum. → https://www.regulationtomorrow.com/2026/03/draft-money-laundering-and-terrorist-financing-amendment-regulations-2026/
6. A&O Shearman FinReg (26 March 2026) – Analysis of the draft regulations → https://finreg.aoshearman.com/the-draft-money-laundering-and-terrorist-financing-amendment-regulations-2026

These sources provide the full original text, parliamentary record, and legal drafting for verification or further reporting. All links are publicly accessible as of 8 June 2026.