Imam Hoque, COO & Global Head of Product, Quantexa
Money laundering, the act of concealing the origins of illegally obtained money, is a real threat to the general public as well as businesses across the globe. Often, there can be a real lack of understanding when it comes to the act of money laundering and when such an incidence would occur. The reality is though, for organised criminals to operate successfully, money laundering must take place. “Dirty money”, from the profits of people trafficking and drug dealing, must be cleaned before it can be used, while finance is needed to support terrorist activity. With the deadline for article 50 being triggered on the horizon and, at present, a no-deal Brexit looking increasingly likely, it’s absolutely crucial the UK Government steps up its efforts to ensure financial safety.
The past year we’ve witnessed a real change in attitudes towards anti-money laundering (AML) regulation within the EU. Previously, legislation on a global scale has been fairly inconsistent. With more high-profile instances cropping up than ever before, the EU has begun to take a much more serious approach to financially motivated criminal activity. The EU’s latest initiative, the 5th Money Laundering Directive, is the first of its kind to take into consideration digital currencies and prepaid cards – something in which the US market can learn from. The focus of the directive is to establish a centralised and public register of companies and their ultimate beneficial owners, halting the creation of shell companies which can be exploited to transform the profits of criminal activity into legitimate assets. Even though the federal government has required banks, brokerages and even casinos to take steps to stop customers from using them to clean “dirty money”, they have largely overlooked newer financial technology until now, reflecting Europe’s forward-thinking approach to combatting white-collar crime.
Yet, it’s important to note that instances of money laundering generally occur in weakened environments. Criminals seek out areas where there is a low detection risk and where potential loopholes and uncertainty exists. The impending Brexit, and all its associated chaos, provides a ripe opportunity for organised criminals to capitalise on our instability. At present, our Brexit deal does not protect financial services, and it is a real possibility that the EU will exclude the UK from further AML initiatives in the foreseeable future. If the UK wants to remain not only competitive but also economically and financially secure, we need to step up our efforts. Not only will we need to stay in line with EU regulation in order to build a strong relationship, we are going to need to place a lot more emphasis on the importance of AML efforts and ultimately transform in order to remain a key player.
According to the National Crime Agency, billions of dollars of “dirty money” is moved through or into Britain each year. The presence of a highly developed professional services industry increases the attractiveness and also the vulnerability of the UK’s financial system to exploitation by those engaged in money laundering. The NCA states that the ease with which suspect foreign money can enter the economy has become an essential aspect of London’s success. According to Transparency International, a shocking £4.4 billion worth of property has been bought with suspicious money in the UK. To ensure corruption does not worsen, particularly with Brexit on the horizon, new legislation is going to be necessary. The National Crime Agency’s roll out of Unexplained Wealth Order ruling is just one example of how we can make a valued impact through regulation. Such legislation reverses the burden of proof, forcing those suspected of gaining assets illegally to prove they were obtained within the confines of the law. Such regulation is going to be absolutely crucial in enforcing change.
It’s evident that British businesses are at a greater risk of being drawn into corrupt practises with Brexit on the horizon. The National Crime Agency has stated there is a possibility we will face a Brexit-driven surge in crime once we leave the EU, with loopholes and instability rife. However, to ensure the economic and financial security of our country, we not only need to retain close ties to the EU, but we also need to up our efforts in innovation, policy and regulation.