The tougher regulations will affect more than 200,000 firms across the financial, accounting and legal sectors, as well as estate agents, insurance brokers and casinos.
Speaking to a financial crime conference, economic secretary Ed Balls said the proposals, published for consultation on Monday, would also reduce the regulatory burden in areas considered to carry a low risk, like Child Trust Funds or pension funds where contributions are made only by the employer.
By taking tough and targeted new measures where the risks are greatest we will crack down further on illegal activity and help force criminals and would-be terrorists out of the shadows, Balls told the conference. The proposed rules will implement the European Unions Third Money Laundering Directive. Britain has to bring the rules into law by December 2007 as EU states harmonise their money laundering and anti-terrorism financing legislation from their current patchwork of inconsistent regulations.
The directive will for the first time require banks and others to investigate the finances of foreign politicians, public officials and their families, to ensure their wealth has been legally obtained.