UK anti-money laundering (AML) – Hot topics for 2018

After an eventful 2017, the year ahead will unlikely be dull on the United Kingdom’s anti-money laundering (AML) scene.

The past 12 months ushered in key reforms, including the Fourth Anti-Money Laundering Directive, the UK’s designs for its own AML and sanctions legislation post-Brexit, a shake-up of main financial crime bodies such as the Serious Fraud Office and its new relationship with the National Crime Agency, the launch of a new umbrella anti-money laundering body, just to mention a few.

Some of what lies ahead in 2018 is set to build upon these and other key developments, planned and unplanned, that will emerge.

In the meantime, KYC360 has been speaking to UK-based analysts and various industry figures about what they are watching out for this year, basically what is set to be hot – or not.

Here’s some of what they said:

Domestic legislation – Failure to prevent (economic crime) clause

Michael Ruck, senior associate, for Pinsent Masons LLP

One of the key pieces of legislation which has been on the horizon for some time is the implementation of a criminal offence by a corporate of failing to prevent economic crime, similar in format to the bribery offence in the Bribery Act 2010 and tax evasion offence in the Criminal Finances Act 2017.

This would illustrate the UK’s ongoing commitment to preventing economic crime and reducing the flow of illicit funds through the UK.

The new legislation, as with other proposed legislative changes, has been overtaken by Brexit and related matters which has caused some delay. The prevention and detection of economic crime remains high on the government’s agenda.

Firms will be required to undertake an extensive compliance review and implement a programme, if they do not have one already, in relation to their employees and other connected parties, for example suppliers and introducers, which seems to ensure their compliance with the legislation

Regional legislation – EU Fifth Anti-Money Laundering Directive (5AMLD)

Nicholas McVeigh, managing associate, Mishcon de Reya:

It will be interesting to see how the UK responds to future changes to AML legislation coming out of Europe and to what extent it will implement those.

With Brexit in view, the UK has already said it aims to continue to abide by EU AML laws, but will there be a point where we decide to do something differently? Firms in the UK will be closely watching the text and adoption of 5AMLD, also known as the directive amending the Fourth Money Laundering Directive.

From a corporate law perspective, the aspects of it which relate to beneficial ownership and the impact on the UK’s PSC register regime will be of particular interest.

Regional legislation – Data protection

Compliance professionals are also keeping an eye on the General Data Protection Regulation (GDPR), which comes into force in May this year.

The EU says the law, which will enable people to have ‘better control of their personal data,’ seeks to slash red tape and reinforce consumer trust.

There is also the Data Protection Directive for the police and criminal justice sector, which is designed to ensure that the data of victims and criminal suspects are protected during a criminal investigation or a law enforcement action.

Fintech and artificial intelligence

Jonathan Grimes, partner, Kingsley Napley LLP

In 2018 we expect the anti-money laundering scene to evolve with technology and artificial intelligence.

AML measures and rules are adapting to the risks posed by emerging technologies and industries, such as crypto-currencies and FinTech.

We will be watching closely the UK’s negotiations with the EU to amend the 4AMLD to regulate crypto-currency exchanges and wallet providers. We will also be keeping an eye on the development of anti-money laundering artificial intelligence and technology to detect suspicious transactions.

Finally, we will be watching closely the Home Office’s review of the suspicious activity reporting regime.

Fintech and crypocurrencies

Andrew Smith, partner, Corker Binning:

In 2018 we expect the anti-money laundering scene to evolve with technology and artificial intelligence. AML measures and rules are adapting to the risks posed by emerging technologies and industries, such as crypto-currencies and FinTech.

We will be watching closely the UK’s negotiations with the EU to amend the 4AMLD to regulate crypto-currency exchanges and wallet providers.

We will also be keeping an eye on the development of anti-money laundering artificial intelligence and technology to detect suspicious transactions. Finally, we will be watching closely the Home Office’s review of the suspicious activity reporting regime.

Regulatory and global demands: the FCA and FATF

Colin Darby managing consultant, Financial Crime Payments and Technology, Bovill:

In theory, professionals (e.g. lawyers, accountants) with AML obligations will start to raise their game once the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) gets itself up and running and applies pressure to the professional body supervisors.

This has the potential to drive significant change in some sectors which have potentially not been so heavily scrutinised in the past.

The Financial Conduct Authority (FCA) are likely to spend more time assessing AML controls at smaller and less traditional firms as it seeks to respond to the IMF’s criticism about being overly focussed on firm size as an indicator of ML risk.

We wonder whether the UK will get the ‘clean bill of health’ it wants from the FATF mutual evaluation, despite recent and in-flight changes to the UK AML regime there is concern that perhaps there are too many gaps around e.g. small FS firms, supervision of professionals, use of trusts and corporates.

Instances of banks not supporting non-bank payment institutions may start to reverse as the FCA and PSR get to grips with supervising bank’s conformance to the access rights enshrined in the Payment Services Regulations 2017.

– By Irene Madongo