A mere 13% of EU regulations have been replaced in the UK following the Brexit vote, according to recent research, a shortfall that is like to cause uncertainty for leading regulatory bodies in the UK and Europe, particularly when it comes advice on stringent money laundering regulations.
The deadline for all regulations to be agreed on is 12 April 2019. In preparation of the exit from the EU, the UK is introducing ‘Statutory Instruments’ which will act as a mechanism to translate EU law into replacement UK law. However, with hundreds of Statutory Instruments being drafted, there are scarcely any final updates on the horizon.
Only after the UK withdrawal is agreed will the trading and regulatory relationship between the UK and the EU be clear. Having gaps in the law throughout the financial sector may result in significant growth in financial crime, as bad actors are constantly in search of chinks in the armour to commit fraudulent activities, says Zac Cohen, General Manager at identity verification experts Trulioo.
“Following Brexit, Fifth Anti-Money Laundering Directive (5AMLD) will change slightly as the EU member states will have to treat the UK as a ‘third country’.”
Currently, EU regulation requires UK payment providers to supply specific documentation from official sources such as government registers and public registers, in connection with transfers of funds between the UK and EU. “
However, treating the UK as a ‘third country’ will require moving from a simplified way of verification to enhanced due diligence checks. The implementation of such techniques may take some time and ultimately will give bad actors further opportunity to commit fraudulent activity,” Cohen adds.
Regulation kept in the silos of government policy can have a negative impact on global trade. Instead, compliance and verification should be instant across a shared international system to combat fraudulent activities and encourage global trade.
“By leveraging innovative technologies to enable a more cooperative approach, there is scope to create a standardised digital structure, which will aid in the dissemination of information that works across borders.
“By having a shared framework in which the EU and UK both operate, it means that the UK will be included along with other EU member states in the interoperability of systems across Europe. This in turn will allow the global marketplace to flourish.”
However, much work still needs to be done, while no fixed position on Brexit seems to be holding its own in the British parliament.
