UK compliance professionals braced for increase in AML legislation

UK firms overwhelmingly support opting out of the European Union’s (EU) 6th Anti-Money Laundering Directive (6MLD), but are taking it as a sign that the UK plans to diverge and create its own AML regulatory framework.

Based on a survey of over 875 compliance professionals operating across banks, lenders, wealth management, accounting, gambling, legal and real estate businesses, the resulting figures are the first to reveal predictions from all corners of regulated industries regarding future UK AML regulation post-Brexit.

The UK recently decided to opt out of transposing the EU’s 6MLD due to many of its requirements being already covered by existing UK law. This decision has overwhelming support from the industry, with 81% of those surveyed agreeing it was the right decision to be made. However, as the LexisNexis research shows, firms are taking it as a signal that the UK is seeking to diverge further from EU AML regulations and create its own.

Nina Kerkez, director of UK and Ireland consulting at LexisNexis Risk Solutions, commented: “As a result of Brexit, we have seen the regulator increase powers to implement more effective regulation which is well suited to the changing needs of the UK. It’s encouraging to see support from the regulated industries as we diverge from the EU’s approach to AML regulations.”

Kerkez added: “We are likely to see increased regulation on the horizon as the regulator flexes its new-found muscles. This autonomy will allow the regulator to tailor controls to the UK’s specific needs when it comes to tackling money laundering. However, they cannot ignore recent revelations that professionals are already struggling to keep up with what’s expected of them when it comes to AML regulatory compliance.”

Implementation plans

Compliance professionals across banks, lenders, wealth management, accounting, gambling, legal and the real estate sectors recently revealed that, on average, they’re only 60% of the way through their 5MLD implementation plans despite the regulation coming into force in January last year.

With a majority of firms already struggling to meet current AML requirements, predictions of regulatory obligations increasing following Brexit, combined with an apparent step-up in regulatory clampdowns seen recently, are likely to be highly concerning for regulated businesses right across the country.

Kerkez observed: “This combination of the increasing regulatory burden, a heightened threat of regulator action and the majority of firms struggling with implementing effective AML controls is a perfect storm of issues that could threaten to further hamper efforts to prevent money laundering from being pervasive in the UK’s financial system.”

Further, Kerkez commented: “We know that the majority of firms (ie 66%) share the belief that 5MLD will have a positive impact, but almost all firms (92%) say they need more guidance on how to implement more effective, risk-based AML controls. This needs to be a rallying call for UK regulators and supervisors to combine their efforts and work together with the industry to ensure they have the right processes, tools and technology in place to stand a chance of effectively detecting and deterring money laundering in all its forms.”

According to Kerkez, as part of this there needs to be a deliberate move away from manual processes towards automating those due diligence checks that can be automated and focusing the attentions of more experienced staff on real risk-based analysis.