I often find myself debating an issue with myself – black skirt or brown skirt, heels or flats, home-cooked meal or takeaway…the list is endless but apart from the mundane things in life that tend to stimulate internal debate, I have also been debating an issue that I am sure many others are too.
To quote (slightly incorrectly) The Clash ‘Should we stay or should we go?’ and how do I think Brexit would impact the UK regulatory landscape? Would it be a positive or a negative move? Will there be any impact?
The results were:
16% no effect
I have to confess to having changed my mind on this a few times, but at the moment I am leaning towards little to no effect.
Those leaning towards Brexit are rubbing their hands with glee at the thought of less red tape from Europe and more freedom for the City to operate on its own terms, rather than those of Brussels, Paris or Berlin; those shouting ‘stay’ are voicing concerns that our policymakers will seize the opportunity to relax rules in the interests of national competitiveness and risk turning the City into a lawless state, opening its arms to all manner of criminality.
I certainly see those arguments. Operating outside the EU will mean we are not tied in to adopting EU legislation – even if it is against our interests – and it would give the potential for us to relax the rules a bit.
But here are a few reasons why I am not convinced we will see an overwhelmingly positive or negative effect.
- The UK is a member of the Financial Action Task force (FATF) in its own right. As such, we would be expected to implement the FATF 40 Recommendations. Whilst these Recommendations are not legally binding in the same way, they become so when adopted by the European Union and included in the EU Money Laundering Directives; to disregard them would affect our status in the international market. Should our internal legislation not meet the requirements we could be blackballed by other jurisdictions. With London as the world’s largest financial centre, would we really run this risk?
- The UK is a permanent member of the United Nations Security Council (UNSC) and as such we are bound by UNSC Resolutions. We have also signed the Vienna Convention, the Palermo Convention, the UN Convention against Corruption, the UN Convention for the Suppression of Terrorism – so we are bound by these and our laws must reflect their requirements.
- We already ‘gold-plate’ European requirements and we are voluntarily far ahead of the European curve with our regulatory efforts – especially from a financial crime perspective. From a money laundering perspective, we have been an ‘all crimes’ jurisdiction since the implementation of the Proceeds of Crime Act 2002 (PoCA) – the EU is only now requiring member states to include tax evasion as a predicate crime for money laundering. We already have measures in place to increase transparency of beneficial ownership (see the Small Business, Enterprise and Employment Act 2015). The Financial Services and Markets Act 2000 widened the scope of market fraud from just insider dealing, well before the EU got in on the act with the 2005 Market Abuse Directive, and we proactively moved to include benchmark manipulation within the scope of market fraud on the back of the LIBOR scandal with the Financial Services Act 2012.
- If our policymakers want to try and carve out safe harbours or exemptions to further national (or perhaps other) interests they will do this anyway! Some would argue that we have already seen an example of this with the Bank of England and the Financial Services Bill, which makes provision to exclude domestic politically exposed persons (PEPs) – such as Members of Parliament – from money laundering enhanced due diligence checks, contrary to the provisions in the 4th EU Directive, by requiring a more comprehensive definition of ‘prominent public person (personally, I think it very specifically includes Members of Parliament) and by requiring the UK regulator to provide guidance on proportionality for those designated as PEPs. While the legislation may be welcomed by those who might otherwise have unnecessarily been caught under PEP provisions, cynics might file this under: ‘One rule for them and another for us’.
So, the time it would actually take to unravel ourselves from Europe notwithstanding, I am not convinced there will a massive swing in either direction, and we will continue pottering on as we always have – and although we don’t always get it right, continuing to set an example for the international community in terms of what good should look like.
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