I’m as fond of AML measures as the next person. Actually, that’s a fib: I’m probably a thousand times fonder of AML measures than the next person. But more than two decades of AML endeavours have taught me one important lesson: softly, softly, catchee monkey. As with most things, if you bombard people with too many tasks all at once, they tend to throw up their hands in despair and resist doing any of them. (Anyone currently trying to get recalcitrant spouses or children to sign cards, wrap presents and decorate trees will know whereof I speak.) And so, much as I love and support the underlying purpose, I am rather cross at the Fourth Money Laundering Directive.
European AML directives are the hippo of the legislative world: slow and ponderous for most of the time, they periodically accelerate to a dizzying speed and hurtle towards you, crushing all resistance, before returning to the shallows to munch peacefully for another decade or so. They are, if you know this pattern, predictable beasts – not least because they contain within themselves their own implementation period. And so the Fourth Money Laundering Directive (MLD4 to its friends) and its two-year implementation period came into legislative force on 26 June 2015, meaning that EU Member States (and other jurisdictions who like to observe these niceties) have until 26 June 2017 to transpose its requirements into their domestic AML legislation. Two years is, as they say, do-able. There’s time for draft legislation to be, well, drafted, and circulated to interested parties, and then tweaked according to local taste. While this happens – as tweaks only are permitted, not wholesale changes – those affected (i.e. AML-regulated institutions) can get on with adjusting their in-house policies and procedures to meet the new standard, holding fire on the final wording until the tweaks are done, the legislation is passed to meet the deadline, and guidance is produced. We all know where we stand. Until we don’t.
In February, following the appalling attacks in Paris, the European Commission decided that MLD4 was not tough enough on terrorist financing, and so they kick-started a process for amending it – in areas such as virtual currencies, pre-paid cards and (a big one, this) another look at beneficial ownership. As I say, I am – in general – a big fan of more AML. And all of these are topics that bear revisiting. But not in the middle of MLD4 implementation. And certainly not by 26 June 2017. It’s simply not fair. It’s not fair on governments, whose transposition of (original) MLD4 is well underway. It’s not fair on AML-regulated institutions, whose adjustment of their in-house response to (original) MLD4 is likewise well underway. And it’s not fair on consumers, who will find it even more confusing to meet a constantly-shifting set of due diligence checks.
I’m not simply stamping my little trotters at unfairness. My main concern is that it make us – the AML community – look foolish and fickle. We have spent decades trying to convince people that the AML measures we impose are considered and proportionate. And if we start changing them on the hoof, that seems like a lie. It looks like a knee-jerk reaction rather than a carefully thought-through and measured response – like a faddy diet rather than a sensible adjustment of eating patterns. In short, we lose credibility. I know this is the season for suspending disbelief, but we in the AML world show uncertainty at our peril: if we cannot, hand on heart, say that our requirements are the very best, deliberated response to current risk, then why should people comply with them? And if we keep changing what we ask of them, they will baulk: they will (quite rightly) wonder why what we want this week is different to what we wanted last week, and conclude that perhaps we don’t know what we’re about after all, so why should they give us anything at all. And that attitude rarely ends well – just ask Richard II of England.
This blog will be taking a Christmas break – back as normal on Wednesday 4 January 2017. A happy festive season to you all.
I note there is some suggestion that in the UK, while we will of course implement the original agreed upon text of the 4MLD, there is opposition to some of these goalpost movements you highlight. RUSI has a interesting commentary on it all.
Happy New year by the by!