AML/KYC screening is a mandatory part of the compliance operations of businesses. Nowadays every business is liable for some sort of KYC and AML compliance, and heavy non-compliance fines and penalties have left no choice but to invest in compliance.
The regulations have changed and are more strict for financial institutions. Recently the EU implemented the Fifth Anti Money Laundering Directive (5AMLD) while Sixth Anti Money Laundering Directive (6AMLD) is in the pipeline.
But the UK has left the union and these laws will not be implemented in the UK. The UK has launched its own AML law in 2018, and it is expected to be the new law in the country.
AML KYC compliance requirements increased
These factors provide 100% certainty in relation to increased compliance, commercial financial compliance, and stationery for those trading in trade, export, trade or finance. No consideration is required for Trade Finances and further due diligence are legal responsibilities.
In the US, there are clear changes in money laundering and anti-terrorist laws, as well as the enactment of landscape law, providing clear signals for new government needs to come.
Like terrorism, which continues their efforts to achieve our shoreline, money laundering and drug trafficking are very real threats to the United States. If you are involved in international trade or in international trade financing, you will have to accept a disproportionate share of the efforts to combat these sick people.
Given the regulatory shift, the risk of financial crime is high. As the UK will be developing its own laws the criminal entities might utilise this loophole to launder money through the financial system of the country. This scenario will cause problems for the reporting entities i.e. banks, businesses, e-commerce, Fin-tech, Financial institutions, etc. As these are used to conduct money laundering.
Let’s see what will be the impact of Brexit on the AML KYC Compliance practices of businesses in the UK.
Laws for the trusts
The trusts are already registered with the authorities in the UK. Most of the trusts do, it was also a part of 5AMLD where almost every trust was required to register with the authorities. It is expected that it will not change after Brexit. It has been projected at Lexology that the laws for the trusts will not change much after Brexit.
The 5AMLD and 6AMLD
The 5AMLD and 6AMLD were targeted to bring uniformity in AML KYC Compliance laws of the member countries of the EU. 5AMLD was implemented before the UK left the EU, but now the UK will be following its own AML/CFT laws, so this will create a gap in the AML laws in the country.
The businesses in the UK will have to follow the new laws made by the UK authorities. Although they will not change substantially, a minor change in the law means changes in the compliance department operations of a business.
The change in the laws of the EU
The laws in the EU will also change, as the UK will now be treated as the third country. The AML/KYC laws in the EU will be changed as per the new scenario. The reporting entities in the EU will have to change their KYC/AML compliance procedures as per the edits in the EU law.
Key elements of trade finance compliance
Trade Finance compliance is complex and takes time. Many people in the industry do what they think they do by typing names and phrases in search engines. Since this produces fruits that cannot be verified and that are likely to create false news like anything else, this does not meet the requirements of Financial Trading Compliance.
- Establish compliance with money laundering rules.
- To establish the true identities of those involved in the transaction.
- Find out that individuals have the proper skills to perform the tasks expected of them.
- To check international fraud programs and criminal records.
- Establishes a final owner (UBO) ownership of the company as companies.
- Companies and their current incorporation detect properly and do not limit litigation or pending actions.
- Make sure the individuals and businesses involved have the financial capacity to deliver what they want.
- To fully understand the source and history of their investment funds.
Impact on trade
The businesses security in the UK and the EU will face some major changes in the trade laws practices before Brexit. The UK will have to develop new agreements with neighbouring countries, and the regulatory subsidies it enjoyed as a EU member will no longer be there to leverage on.
As it will be treated as a third country, the businesses originated in the UK will be facing problems in developing trade relationships with the EU. As the laws will become stricter for them. Also, the UK government will have to make a substantial effort to develop new trade agreements with member countries.
To wrap up, Brexit will have positive and negative consequences for the UK and the EU both. The businesses will undergo some changes in their compliance operations and trade practices. As the Ongoing AML check laws will change in the UK and EU.
As the UK will initiate new trade agreements with the EU member countries the businesses will also update their agreements with businesses in EU member countries.