AML Compliance in post-Brexit world

By Christina Poursanidou, Lawyer/Legal and Compliance Officer 

Ten days before the end of the United Kingdom (UK) transition period to leave the European Union (EU), there is still uncertainty on whether the two sides will agree on a trade deal agreement. During the transition period the UK continue to apply the EU Anti-Money Laundering (AML) Directives, but from 1st of January 2021 new challenges and concerns for the global effort against money laundering appear. With this article, we will set out the impact of Brexit to the fight against money laundering both for the UK and to EU countries.

United Kingdom is historically considered as one of the countries with the strictest AML laws. If it exits the EU without a trade deal, the UK Government has to decide whether it will continue to apply the EU Directives or not. Even from January 2020, the 5th AML Directive (5AMLD) came into force in the UK, while the majority of the provisions of the 6th AML Directive (6AMLD) are already included in the national laws. Undoubtedly, there are aspects of the Directives which are not displayed in UK national rules or have not been implemented yet, which create important concerns, such as the requirement of 5AMLD for creation of Ultimate Beneficial Owners (UBO) registers, which will be accessible by the authorities of the each EU Member State. As far as it concerns the national AML legislation of the United Kingdom, we have to admit that since 2017 British regulators have established high standard AML regulations, with the issuance of Money Laundering, Terrorist Financing and Transfer of Funds Regulations and Sanctions and Anti-Money Laundering Act. In the same time, as new AML watchdog was appointed the Office of Professional Body Anti-Money Laundering Supervision (OPBAS), which is the competent unit to oversee the AML compliance.  

Although, it is worthwhile to consider the impact of word “third-country”, which is included both in the EU AMLDs and the UK national AML laws, for the post-Brexit period. First of all, both EU AML Directives and UK Money Laundering Regulations of 2017 require the conduct of Enhanced Due Diligence (EDD) in third countries due diligence subjects. This means that as from 1st of January 2021” third country” for UK will be any country outside the UK, while in the list of “third countries” for European Union will be added the UK. As a result, a UK bank, receiving an application for opening of corporate bank account from a Greek company will apply EDD and obtain additional approvals before the establishment of business relationship. Similarly, a German corporate service provider shall apply EDD before accepting as a customer a UK resident. As a result, the KYC procedures of the obliged entities will become much tougher.

Obviously, should the UK leave the European Union with no deal, big changes to AML compliance are yet to come.  The regulations may be the same, but the interpretation of them will be different. The AML professionals have to adapt to new standards and those who consider, that Brexit will help their dirty money be laundered more easily, reconsider their intentions.

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