BY ANDREW TARPEY
On June 23, 2016, the people of the United Kingdom, in a referendum that shook up the political establishment of their nation and that of all of Europe, voted to withdraw from the European Union, the political and economic union which comprises most European countries and which the U.K. had been a member of since 1973. In a 52%-48% vote, the people of the U.K. made their voices heard after months of bickering, pleading and persuading on both sides of the issue (informally dubbed the “Vote Leave” and “Vote Remain” campaigns). The leadup to the vote saw prominent British politicians, and indeed well-known Britons in all walks of life, promote the benefits of their side of the issue, while speaking of calamity that would follow should the other side emerge victorious. In the end, with 72% of eligible voters turning out, the Vote Leave side prevailed. The results followed a generational and geographic divide that many had expected. Older voters were more likely to vote to leave the EU, while younger voters mostly voted to remain. Scotland, Northern Ireland and the area in and around London sided with the Vote Remain campaign, while Wales and the rest of England were more in favor of leaving the EU.
Fast forward almost three years later, and there is a lot of debate and uncertainty regarding the logistics of the U.K.’s exit from the EU, which is commonly known as Brexit. Should there be a “soft Brexit”, which would mean the U.K. retains closer ties to the EU on some matters, such as trade and immigration, or a “hard Brexit”, where the ties would be severed more forcefully? That’s currently being debated, with the British Parliament having difficulty coming to a consensus, made more difficult by any decision having to be agreed to by the EU as well.
The United Kingdom’s exit from the European Union will cause drastic changes in legal and governmental affairs, and with high-profile cases of money laundering and other financial crime being tied to some major European banks recently, how the exit will affect the U.K’s fight against money laundering is an important subject to examine. Last year the U.K.’s National Crime Agency warned that Brexit could cause an increase in money laundering in the country. With the U.K. likely to seek increased trade ties with countries outside of Europe, the likelihood of encountering corrupt governments and markets increases; these are particularly prevalent in nations with inadequate measures for countering money laundering. There is also the worry that individuals and companies outside the U.K. who are looking to find a home for their “dirty” (i.e. illegally-derived) money may look to exploit any possible Brexit-related economic downturns and invest their ill-gotten gains in British markets and businesses.
Following recent money laundering scandals in several European countries, most notably the revelation that nearly $30 billion of suspected illicit funds from Russia passed through the Estonian branch of Denmark’s largest bank Danske Bank, the EU has promised to get tougher on member countries and strongarm them into implementing tougher anti-money laundering regulations. Last year they introduced the 5th Anti-Money Laundering Directive, a piece of legislation which addresses several different matters, including the mandate that EU member states make available information on the beneficial ownership of companies, the implementation of anti-money laundering standards for cryptocurrency exchanges, and ensuring that beneficial ownership and source of funds information be provided for transactions with high risk countries. Some of these matters have also recently been addressed by the U.K. in its own anti-money laundering legislation, which is a positive sign that the U.K. shares the same priorities and concerns in matters of financial crime as the rest of Europe. After all, the U.K. was the first European country to mandate that registered companies identify and report their beneficial owners.
Even though the United Kingdom and the EU are headed for a divorce, it would certainly be in their mutual best interest to work together in important matters, with detection and deterrence of criminal activity being among them. Money launderers and other criminals are expected to try to exploit the uncertain nature of post-Brexit U.K., and it would be wise for a permanent agreement to be reached between the U.K. and the EU to ensure that data and resources be shared for the mutually beneficial purpose of preventing financial crime. Organized crime, terrorism and drug trafficking, along with many other forms of criminal activity, are international in nature, and money laundering is closely tied to each. Criminals, who are often part of vast global networks, are looking to move money across borders now more than ever. Thus, it’s imperative that governments unite in devising strategies to combat them and deter the ability of criminals to launder their proceeds in the global financial system. Whatever ties may be cut between the United Kingdom and European Union, maintaining a united front in the fight against financial crime is in the best interests of both.