AML Intelligence
Business Intelligence on AML and Financial Crime for Executive Leaders

EU/Europe, Financial Services, Regulatory

UK firms risk penalties for shortcomings in AML law compliance – ten months after laws came into force

By Dan Byrne for AMLi

A majority of British financial institutions are risking penalties because they have fallen short in aligning with the government’s latest AML laws, according to a new study.

Legal research and risk management firm LexisNexis have assessed that the average British financial firms are just a little over halfway through implementing regulations mandated by ‘5MLD’ anti-money laundering directive.

This is despite the fact that the laws pertaining to that directive came into force in Britain on 10th January.

If found to be in breach of the 5MLD laws, organisations could face fines from the UK’s Financial Conduct Authority (FCA).

“It’s no big surprise that firms aren’t yet fully compliant with 5MLD, but it is slightly disappointing that so many are so far behind and that firms appear not to be prioritising this important legislation,” said Michael Harris, director of financial crime compliance at LexisNexis Risk Solutions.

The report noted that despite the severe impact of COVID-19 on the financial world, the associated lockdowns are, in fact, not the cause of the delay in implementation, according to the Financial Reporter.

Nearly 330 of 500 leading compliance professionals across the UK – working in areas such as banking and wealth management – said that the pandemic has led them to speed up rather than slow down their alignment efforts.

However, the report found heightened levels of uncertainty among applicable entities about long-term goals.

Less than half of the institutions surveyed could confirm that that the 5MLD laws were intended to stop criminals using the UKs financial systems illegally, or that they also aimed to address transparency issues.

The report comes at a key juncture in the UKs AML efforts.

The country featured heavily in September’s FinCEN files whistle-blower leak. Many prominent banks in the UK were shown to have facilitated money laundering on a huge scale.

Additionally, the UK was highlighted as a ‘higher-risk’ jurisdiction in a US Treasury Department communication, owing primarily to the number of times it featured in suspicious activity reports (SARs) associated with FinCEN.

The new 5MLD laws are meant to mirror the EU’s 5th AML directive, which was originally published in 2018. It required all member states to update their laws in alignment with the directive by 10th January 2020.

Although a non-EU county on that date, the UK nevertheless committed to implementing the directive. It remains a single market-participant until the expiry of the Brexit ‘transition period’ on 1st January 2021.  

The directive itself updated previous versions in areas like transparency, cryptocurrencies, and the sharing of information between national financial watchdogs.

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