Important AML updates: National Risk Assessment 2025 and DAML changes with effect from 31 July 2025
David Holland, Chief Inspector and Money Laundering Reporting Officer
23 July 2025
1. National Risk Assessment 2025 published – insolvency remains high risk
On 17 July 2025, the UK government published the latest National Risk Assessment (NRA) of money laundering and terrorist financing. The NRA sets out how key financial crime risks have evolved since the last assessment in 2020 and outlines the steps taken across sectors to mitigate them. Read the full report here.
The services provided by Insolvency Practitioners (IPs) are once again identified as a high risk sector for money laundering, particularly due to exposure to clients from across the economy and the potential to misuse of processes. The IPA consider that Members’ Voluntary Liquidations (MVLs) remain high risk due to the risk of disguising the origin of criminal funds and similarly Creditor’s Voluntary Liquidations (CVLs) are also higher risk where there is a lack of books and records. Risk areas also include cross-border work, complex structures, and interaction with the high-risk sectors and awareness of the threats and typologies outlined in the NRA.
The IPA will shortly publish an updated Sector Risk Assessment. This will help ensure that firms and insolvency practitioners understand the current threats and typologies, and ensure that appropriate changes and control are included into their Regulation 18 and 18A risk assessments, CDD processes, and staff training.
As risks continue to evolve, IPs are reminded of the importance of maintaining robust AML/CTF frameworks and staying up to date with national guidance.
We are pleased that the Insolvency Service reports that 2024 saw a 7% increase in the number of appointment-taking Insolvency Practitioners (IPs) choosing to be regulated by the IPA, which now oversees 46% of IPs, and 71% of the market for Individual Voluntary Arrangements (IVAs) and 73% for Protected Trust Deeds (PTDs) in Scotland. The IPA intends to be the UK’s insolvency regulator of choice in 2025, drawing on our deep sector knowledge to ensure that all IPs maintain high professional standards.
2. Changes to DAML Threshold – effective 31 July 2025
Please be advised that the Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025 has now been made and will come into force on 31 July 2025.
This statutory instrument increases to £3,000 (previously £1,000) the threshold amount of criminal property, which an IP can return to a customer or a client for the purposes of terminating their business relationship under section 339A of the Proceeds of Crime Act 2002 (POCA).
What has changed?
- The threshold in section 339A(6A) allows firms in the regulated sector (which by POCA 2002, Sch.9, para 1(k) includes the activities of a person acting as an IP) to return criminal property (money or other property which represents a person’s benefit from criminal conduct) to a customer/client for the purposes of the termination of a business relationship, without committing a money laundering offence, provided the value is £3,000 or less.
- Similarly, the threshold in section 339A(2) allows banks, building societies, electronic money institutions and payment institutions to carry out a transaction (in operating an account for a customer) without committing a principal money laundering offence under sections 327 to 329 of POCA — provided the value of criminal property involved is £3,000 or less.
Purpose of the change
This amendment is part of a wider effort to improve the efficiency and targeting of the Defence Against Money Laundering (DAML) regime, allowing law enforcement, financial services firms, and consumers to focus resources more effectively on higher-value criminal activity. The updated £3,000 threshold in section 339A(6A) applies only ‘for the purposes of the termination of a business relationship with a customer or client’. Insolvency office holders should seek legal advice if they are unsure whether they are returning money for that purpose.
What firms need to do
- Update internal policies and procedures, including AML, DAML, and SAR policies, to reflect the revised threshold.
- Ensure training and awareness is provided to all relevant staff, particularly those involved in AML compliance and decision-making on reporting.
- Reinforce with senior management the nature of this change and its implications for risk-based controls and escalation.
Important – CDD and SAR reporting still applies
It is important to note that while the exemption threshold has increased, IPs must continue to:
- comply with Customer Due Diligence duties before transferring to a customer/client money or other property, and
- submit a Suspicious Activity Report (SAR) if there is knowledge or suspicion of criminal property. SARs should continue to be made where appropriate, regardless of value, to enable law enforcement intervention where needed.
For the official legislation and explanatory note, please refer to the published instrument here: SI 2025 No. 877 – Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025