Don’t worry: I’m not going to tell you again how I feel about Brexit. This update is purely about the AML implications for those of us left behind in the cast-adrift, backwards-looking, isolationist UK. As you know, the European Fifth Money Laundering Directive is now cast in stone – or listed in the Official Journal, which is pretty much the same thing. This sets the date for implementation: EU Member States are now required to transpose MLD5 into their national legislation by, well, it’s a bit complicated, so I shall quote from the Directive itself: “The amendments to [MLD4] should be transposed by 10 January 2020. Member States should set up beneficial ownership registers for corporate and other legal entities by 10 January 2020 and for trusts and similar legal arrangements by 10 March 2020. Central registers should be interconnected via the European Central Platform by 10 March 2021. Member States should set up centralised automated mechanisms allowing the identification of holders of bank and payment accounts and safe-deposit boxes by 10 September 2020.” So the big date is 10 January 2020.
Which brings us to the UK’s transitional period for an orderly withdrawal from the EU. The current plan – and we all know how terrifically well planned this all is – is for the transitional period to start on 29 March 2019 (Brexit Day, aka Black Friday) and finish on 31 December 2020. In another triumph for UK politicians, they have negotiated a transitional period during which the UK will no longer participate in decision-making at EU level but will still be subject to all relevant EU legislation. (Mind you, this seems like nirvana compared to a no-deal Brexit.) All relevant existing and new EU legislation – including MLD5, which we will have to transpose by 10 January, 10 March and 10 September 2020. (In case you don’t believe me, Lord Henley, a parliamentary undersecretary of state at the Department for Business, Energy and Industrial Strategy, confirmed it in a letter to Margaret Hodge MP on 16 July 2018: “You ask about the government’s plans in regard to complying with the requirements of the fifth anti-money laundering directive. The deadline for the transposition of the directive falls within the implementation period and the UK will transpose this directive.”)
But let’s be realistic about this. Don’t get me wrong – I’m generally in favour of MLD5 and, as with all EU-derived legislation, I believe in taking the rough with the smooth in pursuit of the greatest good. But there are big things in there, not least “centralised automated mechanisms, such as central registries or central electronic data retrieval systems, which allow the identification, in a timely manner, of any natural or legal persons holding or controlling payment accounts and bank accounts identified by IBAN, and safe-deposit boxes held by a credit institution within their territory”, and the drawing of virtual currencies into the AML family. I can’t imagine how many thousand hours of legislative effort just these two changes will take. Are we really going to do it, only to dump it all a year later? Or will the UK, having done it, decide that we might as well keep it? And of course many of the best bits of MLD5 – its interconnected-ness across the EU – will be denied us anyway.
If this were only an academic discussion, it wouldn’t matter much – it would be diverting and puzzling, but not terribly important. But it’s not. MLROs are trying to plan ahead: they have to fight for AML budget and embed AML procedures and ensure that they have enough staff to fulfil their organisational AML duties. Boards are trying to plan ahead: they have to know, for instance, whether they are going to be permitted to have access to beneficial ownership information held by other jurisdictions. We’re not alone, I know: only this morning a local farmer was saying on the radio that he didn’t know where he would recruit his harvesting labour force next year. But if a farmer doesn’t get it right, he loses business. If an MLRO doesn’t get it right, he loses his liberty.
I hate money laundering 