A study by LexisNexis Risk Solutions has found 78% of compliance professionals in the UK see increased anti-money laundering (AML) legislation on the horizon due to Brexit.
The study identified almost four-fifths of compliance specialists who anticipated greater regulation due to the UK’s exit from the European Union.
The research was based on a survey of over 875 compliance professionals across lenders, banks, accounting, legal, gambling, wealth management and real estate. LexisNexis claims these figures are the first to reveal predictions from ‘all corners’ of regulation industries regarding the future of UK AML regulation.
It was recently revealed that the UK had decided to opt-out of transposing the EU’s 6th Anti-Money Laundering Directive (6MLD) due to many of its requirements already being covered by existing UK law.
According to LexisNexis, this decision has ‘overwhelming’ support from the industry, with 81% of those surveyed agreeing it was the right decision. However, the research by LexisNexis has found companies are taking it as a signal that the UK is seeking to diverge further from EU AML regulations and create its own.
The study found that compliance experts across the sectors surveyed recently revealed that they’re only around 60% of their 5MLD implementation plans despite regulation coming into force in January last year.
LexisNexis director of UK&I consulting Nina Kerkez said, “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, and it’s encouraging to see support from the regulated industries as we diverge from the EU’s approach to AML regulations.’
Kerkez also mentioned the UK is likely to see increased regulation as the ‘regulator flexes its new-found muscles’, which will allow the regulator to tailor controls to the specific needs of the UK when it comes to tackling money laundering.
She did mention, however, that the UK cannot ignore recent revelations that professionals are struggling to keep up with what is expected of them when it comes to AML regulatory compliance.
Kerkez concluded, “This combination of the increasing regulatory burden, a heightened threat of regulator action, and a 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 to pervade through the UK financial system.
“We know that the majority of firms (66%) share the belief that 5MLDill 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. 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 focussing experienced staff on real risk-based analysis.”
Another recent study by LexisNexis found AML compliance is costing UK financial institutions £28.7bn and will raise to £30bn by 2023.
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