Impacts of Brexit on Money Laundering Regulations

Blog / Impacts of Brexit on Money Laundering Regulations

England is the first country to exit the European Union. Many economists argued that Britain's exit from the European Union could have distributive and divisive effects for the EU and Britain. However, Britain did not give up its request despite all the predictions and established the Brexit Parliament. Brexit results are at a level that will significantly affect both the United Kingdom and the European Union countries. Therefore, it is a matter of curiosity about how the post-Brexit British economy will take shape.

AML Regulators in The UK

There are money laundering and terrorist financing laws and AML / CTF regulations by these laws created by institutions such as FATF worldwide. All financial institutions must comply with these laws and regulations. All financial institutions have to comply with these regulations, aiming to minimize the adverse effects of crime on the economy by reducing the risk of money laundering with the laws they have determined. Otherwise, institutions that do not comply with these laws receive specific administrative penalties. The regulations aim to detect and prevent financial crimes such as money laundering and terrorist financing. All entities subject to the UK Money Laundering Regulations must comply with policy and procedural obligations to minimize money laundering risk.

The Financial Conduct Authority(FCA) is the agency responsible for regulating the financial service industry, operating independently from the UK government. FCA aims to control financial institutions' behavior in the retail and wholesale sectors, such as stock exchanges, e-money institutions, banks, credit companies, and building cooperatives. FCA's regulations include the implementation of Customer Due Diligence (CDD) measures.

On the other hand, the UK government's tax authority, Her Majesty's Revenue and Customs (HMRC), are often responsible for collecting taxes, protecting UK borders from illegal activity, and auditing whether employers meet a minimum of employee wages. On the other hand, the NCA detects extensive organized criminal activities in the UK and imposes heavy penalties on individuals and institutions that operate. NCA is one of the leading organizations in the fight against money laundering. It has local and international collaborators in Anti-Money Laundering and Counter-Terrorist Financing.

For reading more about AML Regulations in UK, you can check our other content: Anti Money Laundering Regulations in UK

What is Brexit?

Brexit changed the course of the economy; It means Britain leaves the EU. It is derived from the combination of English words for United Kingdom and exit.

It is the withdrawal of the United Kingdom (United Kingdom) from the European Union (EU). The UK is the first and only country to leave the EU after 47 years of membership officially. The crisis in the eurozone is the most critical reason for going. Apart from this, the negative reflection of the European Union regulations on British companies, the increase in additional costs, and the British pound's depreciation led the UK to the Brexit referendum.

Britain left the EU with 52% of the votes it received due to the referendum held in June 2016. The conservative government's suspicions towards the EU prompted the secession process to begin. On 29 March 2017, according to Article 50 of the British Treaty on the European Union, the withdrawal process was officially launched with Parliament's permission. However, when the EU accepted the proposal requested by the then Prime Minister David Cameron to apply other currencies other than the euro in Europe, David Cameron started an anti-Brexit campaign. Thereupon, he declared his resignation due to the people's answer to the UK's decision to leave the EU in the referendum held in June 2016.

Why The UK Made Brexit Decisions?

There are several reasons for the UK leaving the EU. The clearest one of these is the crisis in the eurozone. This decision to leave had economic effects in many EU and UK countries. Thus, with this decision, UK-based companies made many new decisions.

Also, we can explain why Britain wants to leave the EU in two different ways politically. Since 2008, the pressure of the European region in the UK has increased. The halt in trade volume expansion caused the UK to see the EU as a stumbling block. The restrictions imposed by the EU on its domestic and foreign trade network were the most significant factor in the UK's Brexit decisions.

How Did Brexit Effect Money Laundering Regulations?

On 31 December 2020, the UK will complete the transition period to leave the European Union (EU). Brexit has many implications for many countries and industries. Still, it is a matter of curiosity to what extent the impact will be. With this UK's decision, other questions are as follows: How will the regulatory environment take shape after Brexit? What will be the impacts of Brexit on EU Anti-Money Laundering Directives and Regulations? According to 5AMLD, EU legislation should link UK financial providers to UK fund transfers by providing specific documents from official sources such as the government. At the same time, the UK's acceptance as a "third country" is expected to slow down economic processes and harm trade, resulting in improved due diligence checks.

Slowing the process can increase the risk of money laundering and terrorist financing. In this case, businesses should implement an excellent risk-based approach process. The compliance of the laws with 6MLD makes this directive less of a concern for the UK. It is also the case for the UK that certain crimes are punished according to AML obligations. Although it is not known how the UK's exit from the EU will affect these two directives, it is also a question of whether the 5AMLD and 6AMLD will be deemed valid after Brexit.

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