The UK started the official process for leaving the European Union by triggering Article 50 this week. Yet a new report from the Organisation for Economic Co-operation and Development (OECD) suggests that leaving the EU could damage the UK's efforts to tackle money laundering, bribery and corruption.
The report by the OECD's Working Group on Bribery in International Business Transactions notes that a number of media outlets and NGOs have raised concerns that the Brexit vote could "set back" the UK's fight against corruption and bribery. There are worries that the EU's rules on money laundering and sanctions would no longer apply to the UK, and that the UK would lose access to EU mechanisms for international cooperation such as Europol and Eurojust. There are also concerns that the UK will come under more pressure from businesses to weaken the Bribery Act, so that UK companies can attract new investment once they lose access to the European single market. Critics say the country's focus on leaving the EU will relegate new legislation to combat economic crime further down the government's agenda.
While such concerns are not to be dismissed, this week's triggering of Article 50 does not mean that UK's fight against bribery, corruption and financial crime will change overnight. The terms of the exit must be negotiated and ratified in national parliaments—a process that is expected to take two years. In the meantime, UK companies must ensure they comply with applicable laws, such as the Fourth EU Anti-Money Laundering Directive (4AMLD). 4AMLD requires companies to take a proactive approach to anti-money laundering (AML) compliance. This includes taking a risk-based approach to identifying and mitigating AML risks and subsequently carrying out sufficient customer due diligence and on-going monitoring of AML risks, retaining auditable records of customer due diligence for five years after the relationship has ended, and maintaining "adequate, accurate and current information" on beneficial ownership. Download our free white paper, 'Taking Aim at Ill-Gotten Gains,' to learn how 4AMLD will impact global financial institutions and other multinationals.
Even when the UK does leave the EU, and is therefore no longer bound by 4AMLD, it is unlikely to become a soft touch on money laundering. The Directive ultimately stems from recommendations from the Financial Action Task Force (FATF), which the UK has historically been quick to adopt. Moreover, work on the UK's proposed response to 4AMLD, in the form of the Criminal Finances Bill, is well underway. Written evidence from the British Banking Association (BBA) suggests that the 200 member banks are "fully committed to and supportive of the need to improve the collective response of UK PLC to money laundering, financial crime, terrorist financing and tax evasion." Given that BBA members include 80 percent of "global systemically important banks," the outlook for continued vigour in legislating against money laundering, bribery and corruption is positive. At the London Anti-Corruption Summit in May 2016, for example, the UK announced a new public register of beneficial ownership information. A new Anti-Corruption Coordination Centre hosted by the UK will be launched next month.
The OECD's report said foreign bribery enforcement in the UK has "increased significantly" since 2012. This was credited to "the pragmatic and effective approach taken by the Serious Fraud Office (SFO) to investigate and resolve foreign bribery cases". It welcomed the UK's "strong anti-corruption drive", especially the organisation of the London Anti-Corruption Summit in May 2016. It also recognised the UK for enhancing its capacity to detect foreign bribery, and for improving whistleblowing channels.
This praise for the SFO comes in the same month that the UK regulator's Joint Head of Bribery and Corruption announced that Deferred Protection Agreements (DPAs) have become the "new normal" for companies that self-report evidence of bribery and corruption and cooperate fully with the subsequent investigation. Earlier this year, Rolls-Royce agreed with the SFO to pay more than £497 million in a DPA to settle allegations of international bribery and corruption. In light of such praise, the consequences of Brexit on the future of anti-money laundering, bribery and corruption enforcement may not be as dire as critics suggest.
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