The UK's current Anti-money Laundering (AML) legislation,
The Money Laundering Regulations 2007, stem from the EU's 3rd
Money Laundering Directive which was published by The European
Parliament and The Council of the European Union in 2005.
As this Directive is now more than 10 years old, on the 25th
June 2015 the EU finalised its 4th Money Laundering Directive to
strengthen the EU's fight against money launders and terrorist
financiers. EU member states have until 26th June 2017 to implement
the requirements of the new Directive into their national laws.
However, on the 23rd June 2016 the UK electorate took a decision
that is sure to alter the UK regulatory landscape - Brexit.
How Brexit will affect the UK's money laundering laws is
still uncertain but here are a few possible scenarios.
Business As Usual – Even though
the UK has voted for Brexit, the 2 year negotiating process of
leaving the EU will not officially begin until the Government
triggers Article 50. Assuming this happens this year, then it will
be 2018 at the earliest that the UK ceases to be an EU member
state. Therefore, as the deadline for implementing the provisions
of the 4th EU Money Laundering Directive is June 2017 the UK will,
in the absence of any EU concessions or agreements, still have to
enact legislation to bring the requirements of the 4th EU Money
Laundering Directive into effect. Going forward the UK may, in
order to maintain a level playing field with the EU, choose to base
its future AML legislation on subsequent EU Money Laundering
Directives although the UK will no longer be able to influence the
content of these.
From EU to FATF – Once we leave
the EU, the future of UK AML legislation will be shaped by the
Government of the day. However, just because we will no longer be
automatically governed by EU Money Laundering Directives
doesn't mean the compliance burden will markedly reduce. The UK
remains one of the 37 Members of the Financial Action Task Force
(FATF) and must therefore ensure it remains compliant with
FATF's 40 Recommendations, last revised in 2012. The UK is
subject to Mutual Evaluations by FATF, with the next one scheduled
for 2018, and will therefore want to ensure it maintains
sufficiently robust AML legislation to avoid being classed by FATF
as a High Risk or Non-Cooperative jurisdiction.
Setting the standard – As the recently
introduced Persons with Significant Control (PSC) Register
demonstrates, the UK Government is committed to setting a high
standard with regard to transparency. Not only did they decide to
introduce a beneficial owner register sooner than most other EU
member states, they went beyond the requirements of the 4th EU
Money Laundering Directive by making the UK's PSC Register open
to public inspection. The UK Government may therefore seek to set
the gold standard for future AML legislation by going above and
beyond FATF's Recommendations. This could mean the UK adopts a
more onerous AML regime which, although helping to protect the UK
from flows of illicit money, could leave us at a disadvantage
against other EU financial centres.
Whatever the long term consequences of Brexit, the UK will
likely remain a key financial centre where financial institutions
and other professional bodies take AML compliance seriously,
meaning investors and entrepreneurs can feel confident that the UK
will continue to be an attractive place to invest and do
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).