On December 31st 2020, the UK will complete its transition period to leave the EU, with or without a trade deal agreement in place. The City of London is asking whether Brexit risks making the UK’s money laundering fight harder.
Intelligence sharing by law enforcement across borders is just one aspect of the immediate choice facing the UK in tackling financial crime. More fundamentally, the UK must now decide whether to follow the US approach to financial sanctions, stick with the European Union’s priorities, or go it alone.
5th Money Laundering Directive
Early this year in January, the EU’s 5th Money Laundering Directive came into force in the UK. This will still stay in place. However, after Brexit, this will slightly change, as the states that remain part of the EU will have to begin treating the UK as a third country. Treating the UK as a third country will require moving from a simplified way of verification to enhanced due diligence checks. This could potentially slow down existing processes and may harm trade.
The largest impact could be if the UK is treated as an equivalent jurisdiction in terms of due diligence. At the moment the UK is a member of Europol, which allowed the sharing of information across member states while investigating. However, the UK may not continue to enjoy its benefits post-Brexit. It is incredibly likely that the withdrawal process will lead to the UK leaving Europol, and even if the government were to sign a new bilateral security agreement with the EU, indications from Brussels suggest that the UK will no longer be able to access to the data.
6th Money Laundering Directive
The 6th Money Laundering Directive (6MLD) is less of a concern for the UK because our laws already comply with the vast majority of the 6MLD. This includes, for instance, an obligation to prohibit laundering of the proceeds of specified predicate offences, whereas the UK’s laws already apply to any predicate offence.
Criminals gravitate towards areas of weakness and Brexit has the potential to adversely affect the UK’s system of defence against money laundering. The UK will no longer be in a position where they are able to influence other EU- related matters, so the ability to combat money laundering could be curtailed.
At AML & Compliance, we work with businesses to create the necessary documentation and have the processes in place to ensure the business and its staff are protected and compliant. To enquire about our services and how AML & Compliance can work with your business you can call us on 0203 985 8553, email us email@example.com or complete an enquiry form.