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The UK has been warned that it faces being left behind in the global fight against money laundering unless it works with the European Commission’s new anti-money laundering (AML) agency.
The establishment of the Anti-Money Laundering Authority (Amla) and is one of a raft of measures due to be brought in as part of the EU’s action plan to combat money laundering, which will be introduced on 20 July.
Amla will operate on an EU-wide basis, independent of member states’ national authorities – a move designed to give it greater authority to both identify and penalise significant money laundering acts.
The EU will first have to table the legislation needed to create the agency and it is expected to be operational by 2024. Amla will also have new powers to fine businesses up to 10% of their turnover for breaching AML rules.
It will also be assessing money-laundering risks posed by countries outside the EU, which includes the UK. While Amla will not be able to issue fines directly on UK companies, it looks set to be a driving force in the international effort against dirty money.
The action plan is the EU’s boldest step yet against a growing problem. Billions of euros of suspicious transactions are estimated to take place each year but enforcement is hampered by the inconsistent patchwork of regulations across the continent.
“By directly supervising and taking decisions towards some of the riskiest cross-border financial sector obliged entities, the authority will contribute directly to preventing incidents of [money laundering and terrorism financing] in the union,” states the draft document.
“It will coordinate national supervisory authorities and help them to increase their effectiveness in enforcing the single rulebook and ensuring homogenous and high-quality supervisory standards, approaches and risk assessment methodologies.”
According to UK regtech firm SmartSearch, the EU’s move is a welcome one and should be backed by UK businesses.
“The formation of a dedicated resource to tackle the growing problem of money laundering, primarily through sectors such as the property market, is a positive step by the EU,” said SmartSearch chief executive John Dobson.
“Since the outbreak of the global pandemic, we’ve seen organised criminal gangs in the UK taking advantage by exploiting loopholes in AML processes and using increasingly more sophisticated forged ID documents to get their dirty money through the laundering process.
“Of course, this is a global issue so it’s vital that the UK coordinates its response with the EU and other nations, as organised crime gangs won’t be concerned about political borders,” added Mr Dobson.
The UK’s Chancellor Rishi Sunak announced the formation of a new taskforce to tackle tax evasion and fraud as part of his March Budget announcement. The new Her Majesty’s Revenue and Customs department is set to employ 1,000 extra investigators.
Mr Dobson said the taskforce must coordinate its efforts with Amla and other international and national agencies.
“Obviously as we are no longer part of the EU, this new authority will have no jurisdiction in the UK, but in order to be able to fight the threat of money laundering here in the UK most effectively, it’s vital that we coordinate and cooperate with the AMLA, otherwise we risk getting left behind,” he said.
UK businesses have not been immune to the challenges from AML – from the cost of compliance to the large penalties handed out for contraventions.
A report by LexisNexis Risk Solutions in June found that UK financial institutions were spending more than £28bn on AML compliance, equivalent to half of the UK’s defence budget.
AML efforts have also been challenged by the rise of cryptocurrencies in recent years, although the Metropolitan Police in the UK this week seized nearly £180m of bitcoin following an international investigation.
“While cash still remains king in the criminal word, as digital platforms develop we’re increasingly seeing organised criminals using cryptocurrency to launder their dirty money,” said Metropolitan Police deputy assistant commissioner Graham McNulty.
There have also been some more embarrassing money laundering convictions recently. In June a former AML expert who spent 14 years as the chair of the Association of UK Payment Institutions was found guilty of laundering £850,000 – the proceeds of an investment scam.