Accounting sector seeks clarity on post-Brexit AML regulation

02 June 2021 Consultancy.uk 3 min. read
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Following the secession of the UK from the EU, many professional services firms feel they have been left in the dark about the application of new anti-money laundering rules. At the same time, many fear new rules and a regulatory clamp-down in the coming months might exacerbate the situation, making the existing legislation less effective.

The UK Brexit transition period ended on 31 December 2020, and new rules have applied the beginning of 2021. Anti-money laundering (AML) and counter terrorist financing is one area where large amounts of new legislation are now expected to paper over gaps between the financial systems of the remaining EU 27 and the UK.

According to a new poll of more than 875 compliance professionals in the real estate, banking, accountancy, lending, wealth management and legal sectors, a majority of professionals expect a spike in AML regulation as a result of the UK leaving the EU. According to LexisNexis Risk Solutions, with 76% of compliance professionals in the accounting sector expecting more AML regulation now, many professional services firms face being overwhelmed by changes to the current regime.

Accounting sector seeks clarity on post-Brexit AML regulation

The researchers also found that the industry is showing signs of struggling to comply with the current regulatory burden in AML. On average, respondents said that they were only 60% of the way through the implementation of 5MLD, despite it coming into force more than one year ago. 

To make things worse, 79% of compliance professionals added that they believed a regulatory clampdown was on the horizon in the next 12 months, with almost half thinking it could be within six months. As a result, the researchers assert that the accounting sector is currently exposed to money laundering breaches, regulatory fines and reputational damages.

Nina Kerkez, Director of UK&I Consulting at LexisNexis Risk Solutions, said, “The regulatory burden of AML compliance, including the requirements of 5MLD, is hugely challenging for all industries, but it appears that compliance professionals in the accountancy industry feel like they’ve been cast adrift by the regulator at a critical time in proceedings.”

Illustrating this, the research found that members of the accounting sector in particular had issued a call for clearer regulatory guidance on the implementation of AML programmes. A huge 87% of compliance professionals in the industry argued that the regulator should provide better guidance – the absence of which also seems to have compromised their faith in 5MLD, with 43% saying they expected the directive would have no impact on their ability to detect or prevent financial crime.

In this case, the researchers claimed that regulators needs to better show the tangible benefits of 5MLD, if they want to see better progress being made towards implementation. At the same time, bodies could do more to advise firms on how investment in technology can further the fight in prevention of financial crime – including the automation and streamlining customer due diligence and investigations processes, which could free up the time of skilled professionals to focus on robust risk-based value adding activities instead.

Kerkez added, “It seems what’s needed is a strong regulatory / industry collaborative partnership, where all regulatory and supervisory bodies can work closely together to resolve these educational gaps and make better progress towards their AML implementation. And if firms’ predictions about the post-Brexit regulatory clampdown prove accurate, this needs to happen sooner rather than later.”