Looking at the past year, it’s evident that 2018 saw some incredibly high-profile cases of money laundering. For offenders to operate successfully in organised criminal circles, ‘dirty’ money needs to be cleaned before it can be used. This poses a real threat to not only businesses but also to the general public, as criminal activity such as people trafficking, terrorist financing and drug dealing is funded and supported by laundered money.
Prominent instances of money laundering have brought attention to the issue, and have encouraged financial institutions across Europe to tighten up their regulations and take a step in the right direction to prevent financial crime. The European Commission’s 5th Anti-Money Laundering Directive was a prime example of this. Enforced in July this year, the aim of the regulation was to establish a centralised, public register of companies and their ultimate beneficial owners, therefore reducing the number of shell companies that exist.
With Brexit less than 100 days away, the matter of how the United Kingdom might continue its fight against money laundering once it has exited the European Union is now extremely topical. According to the National Crime Agency (NCA), British businesses are at risk of being drawn into corrupt practices once the UK leaves, in a Brexit-driven surge in crime. In May, the NCA stated that UK-based companies who are looking to increase trade with countries outsides of the EU are more likely to come into contact with corrupt markets, particularly in the developing world. The organisation also warned that Brexit will increase opportunities for criminals to launder money, with overseas firms investing ‘dirty cash’ in British businesses, particularly if they deal in high-value items such as gems and precious metals.
Just four months ago Brussels announced they were planning to strengthen their attempts to combat money laundering and terrorist financing, reflecting Europe’s renewed efforts to fight white-collar crime. The proposals, shared with the European Banking Authority (EBA), will ensure Europe’s banking supervisor is the ultimate meditator when it comes to money laundering. The EBA has been given the authority to not only directly address problems at banks, but also to perform risk assessments, collection information and develop AML standards. This is a huge step in the right direction, reflective of Europe’s renewed approach to such enforcement and ultimately their aim to get on a level playing field with the United States.
According to Fenergo and its Director of Regulatory Compliance, the number of money laundering fines globally are beginning to plateau. Europe currently makes up seven per cent of global anti-money laundering fines imposed in the last 10 years. However, the actual value of each fine is increasing. This is an initiative which is being led by the Dutch market, who have issued the highest fines in the past decade. This is accompanied by an increasing AML focus from the Nordics, the only region in the world where banks have been fined by domestic regulators more than international regulators. These are just a few of the big changes taking place across Europe.
Even though such developments are incredibly positive and demonstrate how Europe is beginning to take the threat of financial crime seriously, the UK’s withdrawal from the EU poses a real risk. Leaving may exclude the UK from forward-thinking conversations regarding not only money laundering but all white-collar crime. At present, efforts depend greatly upon cooperation and collaborative international treaties, meaning the UK may be forced to withdraw from such agreements if a no-deal Brexit is the outcome. With the UK eliminated from such agreements, it means banks will have to commit to working cooperatively on an international scale if they want to remain ahead of the game and make a valued, lasting impact.
Money launderers often seek out areas where there is a low detection risk due to weak or ineffective AML policies. With the UK’s chaotic exit of the European Union fast approaching, it provides the perfect opportunity for money launderers to take full advantage of potential loopholes and the uncertainty shrouding agreements.
According to the NCA, criminals are likely to exploit the redesigned customs setup as well as any gaps in intelligence-sharing between countries. Britain’s security arrangements with Europe need to be protected to ensure the safety of not only businesses, but also of the general public. Currently, the UK is a member of Government agency, Europol, which works to achieve a safer Europe for the benefit of all EU citizens. Not only does this membership ensure safety of members of the public, it also gives the National Crime Agency and the police force in the UK access to tools which enable them to efficiently share data and intelligence with European correspondents.
With Brexit fast approaching, the fight against money laundering – and in fact all associated crime – will become tougher. While money launderers seek out potential loopholes and capitalise on our country’s uncertainty, firms will need to remain extremely vigilant while policymakers need to ensure we are entering into intelligence-sharing agreements with Europe, much like Europol. Ensuring our security agreements with Europe becomes of utmost importance not only to protect UK-based businesses but also for the safety of the general public.
Imam Hoque is COO & global head of product at Quantexa.