The UK could face some major obstacles proving its compliance with the global regime on anti money laundering and countering terrorist finance in the next round of international evaluation
The anti-money-laundering (AML) and counter-financing of terrorism (CFT) agenda appears, at least from the rhetoric, to be high on the current government’s agenda. Recent announcements regarding greater measures to increase transparency in property ownership and proposed powers to tackle unexplained wealth suggest that the UK is seeking to challenge its reputation as a haven for global money laundering. But are these efforts enough to achieve the global standard in this field, as set by the Financial Action Task Force (FATF)?
The FATF is responsible for formulating and updating the global standards on AML/CFT and regularly reviews its members’ compliance with these standards, encompassed in the ‘40 Recommendations’, through their peer-review evaluation process. The UK’s compliance with these Recommendations was last evaluated by FATF in 2007. Despite the UK achieving the required FATF standard in a wide range of areas, certain critical aspects of the UK’s financial-sector compliance and supervisory regime, such as customer due diligence requirements, fell short, largely due to the disputed status of the Joint Money Laundering Steering group (JMLSg) guidance.
By 2009 the FATF plenary deemed the UK to have made sufficient progress on a number of the deficiencies identified, mainly through the transposition into UK law of the EU Third Money Laundering Directive, in the form of the Money Laundering Regulations 2007, and removed the UK from the FATF’s ‘regular follow-up process’.
Based on the resolution of the issues raised by the FATF during the previous evaluation, it might be reasonable to conclude that the UK does not have cause for concern when it next faces the FATF assessors in 2018. But this paper, based on a literature review and a number of interviews with current and former AML/CFT practitioners and policy-makers, notes why this may not be the case.
About the Author
Helena Wood is an Associate Fellow of RUSI. Her research focuses on the efficacy of the powers of the Proceeds of Crime Act in the fight against organised crime and the UK’s anti-money-laundering architecture and its compliance with the Financial Action Task Force standards.