The fight against financial crime in the post-Brexit era
On 31 January 2020, the UK left the European Union after almost 3 years of intense negotiations.
Until at least 31 December 2020, the EU law will still apply in the UK although the country is no longer a Member State and cannot participate anymore in the EU decision-making processes and in the EU institutions or bodies. During this transition period, which can be extended once by up to one to two years, the two sides should agree on a new partnership for the future.
By 10 January 2020, EU Member States were required to implement the provisions set out in the Fifth EU Money Laundering Directive (5MLD). Therefore, even though the UK was scheduled to leave the EU at the end of January, as a Member State on the implementation date, it was required to transpose the norms of the Directive into domestic law.
The UK Government published on 20 December 2019 the Money Laundering and Terrorist Financing Regulations 2019, which will give effect to the legislative changes required under 5MLD. These changes will have an impact in different ways:
Extending the scope of obliged entities;
Enhancing due diligence measures;
Ensuring that bank account portals can be accessed by financial intelligence units and national regulators (the intention is to improve the effectiveness of investigating regimes);
Creating a system of registration for crypto-asset business.
These norms have come into force last January. Exceptions include the ones governing customer due diligence measures on anonymous prepaid cards and requests for information about accounts and safe-deposit boxes that will come into force on 10 July and 10 September 2020 respectively.
Until December 2020, the UK must adhere to EU standards. Afterwards, the gap between the two legal systems will depend on the nature of the relationship that will be negotiated this year. The possibility for UK to deviate from the EU regulatory frameworks after the transition period is a matter of much debate.
However, premises suggest that this will unlikely be the case.
Firstly, the Withdrawal Agreement ensures that the withdrawal will happen in an orderly manner by offering legal certainty once the EU Treaties will cease to apply to the UK.
Secondly, in the Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom, the parties envisage, at article 82, continued cooperation through international bodies, such as the Financial Action Task Force (FATF), to fight money laundering and terrorist financing. In addition, in paragraph 89, it is agreed the intention to go beyond the FATF standards with regard to transparency and ending anonymity associated with the use of virtual currencies.
At present, this Political Declaration is only a list of intentions. Nevertheless, the UK is a major contributor in the fight against money laundering and terrorist financing and its government publicly committed to transposing 5MLD regardless of whether the UK was a Member State on the date of implementation.