HM Treasury says its recent review of the money laundering regulations brought in in 2007 found that they are "broadly effective and proportionate, but that improvements could be made".

It argues that moves need to be made to reduce the regulatory burden on British businesses and discourage a "tick-box" approach to anti-money laundering.

Over two dozen criminal penalties for businesses which fail to have the appropriate systems and controls in place could be scrapped. This would allow businesses to implement a fully risk-based approach, where they make their own assessment of the situation and implement the appropriate systems and controls, says HM Treasury.

Civil penalties will remain and the government will be consulting on whether regulators should have the power to impose additional penalties.

There are also plans for a general exclusion for very small businesses - for example those with below £13,000 VAT-exclusive turnover per annum.

Commercial secretary, Lord Sassoon, says: "It is essential that the UK's money laundering regulations make the UK a hostile environment for money laundering and terrorist finance. But improvements can be made and we must consider the impact of these regulations on British business."

The move has been welcomed by Mark Coronna, chief marketing and product officer at vendor Wolters Kluwer, who says: "This proposal seems to match costs and risks in a more appropriate way for these smaller businesses. It is also interesting that this proposal seems to be an opposite trend to the "one size fits all" regulation that some see on the horizon with stronger EU-wide regulation through the new regulatory bodies, especially in financial services."

The proposals are now open to consultation until 30 August.