Money laundering & Brexit
The U.K.’s withdrawal from the European Union is complicating the bloc’s fight against money laundering in the financial system, according to EU authorities. Firms relocating from Britain could overwhelm the national bodies that supervise anti-money laundering systems, the three EU financial regulators said in a joint report published Friday. A no-deal Brexit would make things even more difficult by disrupting the exchange of information between supervisors, they said.
There’s a risk that authorities “may not be adequately equipped and staffed to effectively oversee significant numbers of new firms,” and that the robustness of supervision “might suffer as a result,” the regulators — including the European Securities and Markets Authority and the European Banking Authority — said in the report.
European banks have been hit by a series of scandals caused by insufficient controls against money laundering, with Danske Bank A/S’s Estonian unit being the most prominent case. Dutch lender ABN Amro Bank NV last month became the latest target of authorities, disclosing a criminal probeover alleged failures to check on clients and report suspicious transactions.
EU officials have tried to figure out what exactly went wrong with the financial system in recent years and have vowed to beef up controls. The bloc’s regulatory framework is fragmented along national lines, while financial markets are international in nature and money moves quickly across borders. These national differences pose a challenge for firms moving to the rest of the EU from the U.K., as they must get used to specific rules in their new home countries, according to the EU regulators. More broadly, the regulators said they are concerned about “weaknesses in the control frameworks put in place by financial institutions,” particularly in sectors with high volumes of transactions. They also said new technologies pose a risk to financial institutions, “if vulnerabilities are not understood and mitigated.”