Third Directive: impact certain, cost unclear

Economic forecasting is a far from exact science as finance ministry officials know only too well. According to HM Treasury’s Regulatory Impact Assessment (RIA) the margin of error is evidently similarly wide when it comes to the estimation of costs associated with UK implementation of the Third EU Directive on money laundering and terrorist financing (MLD3): it puts the figure somewhere in the range UK£5 million to UK£46 million. UK financial and credit institutions, already well used to the AML (antimoney laundering) regime, if not to CTF (counter terrorist financing), will be relieved to learn that the Government expects they will have to bear only minor extra charges over and above what it terms “familiarisation costs” to cover administrative, for example definitional revisions; across the regulated sector as a whole, such amendments are anticipated to sum to between UK£1 million and UK£2million. The bulk of the additional expenditure is attributable to two sources: firstly, enhanced due diligence (EDD) that non-Financial Services Authority regulated entities will need to apply to politically exposed persons (PEPs) and other high risk scenarios under MLD3 (between UK£2 million and UK£19 million); and secondly, the cost of establishing formal supervision/monitoring of estate agents and trust and company service providers [T&CSPs] (from UK£852,000 to UK£20.6 million). Registration or licensing of T&CSPs carries a lesser variance – it is expected to cost in the range UK£252,000 to UK£502,000 - while it rises again in the case of compliance costs which estate agents and T&CSPs may incur; these are thought to lie somewhere between UK£790,000 and UK£4 million.