Jumping on the Brexit bandwagon

Having last week been accused of (or congratulated on – I couldn’t quite tell) being political, I thought I might as well go with the flow.  About three weeks ago I was doing some training in London, talking about the Fourth Directive, and someone asked what would happen when (not if, but when– they seemed jolly certain about it) we leave the EU.  Now I am not going to say whether I support Brexit or not, mainly because my view does not count one jot beyond my one little vote, but it is interesting to ponder what might happen in the world of AML.

If the UK leaves the EU, it will no longer be obliged to comply with EU legislation – including MLD4.  But of course the UK will still want to participate in global financial markets, and will still be a member of the FATF, and so it will want to comply with international standards on AML, which is basically MLD4.  And as a lone voice, rather than as part of a club of twenty-eight, the UK would have less influence on shaping those international standards in the first place.  On the other hand, a non-EU UK would have more latitude to pick and choose the bits it likes and the bits it wants to hang fire on – much as Guernsey, Jersey and the Isle of Man are doing now.

One thing that will change immediately is the UK’s equivalent status.  As a member of the EU, it is granted pretty much automatic equivalent status by all other EU Member States, which allows a few due diligence shortcuts.  These will disappear, and indeed, if our former bedfellows cut up snippy about our desertion, the UK might even find itself at the other end of the spectrum, considered a high risk money laundering jurisdiction.  Any agreements with other jurisdictions – you scratch our back and we’ll scratch yours – would have to be negotiated one by one.  And I’m far from expert on the implications for international exchange of information between FIUs but again, I should imagine that the loss of the EU club short-circuit will necessitate some renegotiation.

So those are my AML Brexit thoughts – how about you lot?  What might it mean for the MLRO-about-town?

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2 Responses to Jumping on the Brexit bandwagon

  1. Robert James Long says:

    If you’ll excuse my cynicism, I believe that in the event of an exit, our former EU partners might be quite right to treat us as a higher risk money laundering jurisdiction (there is after all no poverty of evidence that various participants of the UK financial service sector are not doing due diligence) at least initially. My horror scenario is that in order to go super competitive in the event of an exit (especially if our former European collegues do “cut snippy”) the UK starts slicing away as much of its AML as it can, because what this nation needs is more hot foreign money of dubious origins (on top of all the dubious local money!).

    I do wonder if, form the point of view of a money launderer, it is better or worse for us to remain in? Having heard from scientists, educationists, business leaders and, Sophia preserve, politicians over the last few months, I would curious to know what that class of ne’r-do-well thinks.

    (Honestly, I don’t think anyone knows anything about what will happen in either situation. If life has taught me one thing it is that in the medium to long term, economists have no idea what they are talking about and are about as effective as at prediction as Tarot cards)

  2. My blood is running cold, Robert, at the thought of all that potential super-competitive wooing of hot money of dubious origins. And it would be good to hear the view of a professional money launderer, wouldn’t it? I know some of them read this blog, so here’s hoping.
    Best wishes from Susan

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