Let’s risk it for a Brexit

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Better late than never, I suppose – the UK’s third National Risk Assessment, due in October 2019, was finally published on 17 December 2020.  When discussing risk assessment with MLROs, I describe it as a focussing exercise: you start big, with the broad sweep of a National Risk Assessment, then you look at any sectoral risk assessments that may be relevant, then you devise your much more tailored Business Risk Assessment (which refers to the previous two steps and shows how your specific business either reflects or refutes the risks identified for your jurisdiction and sector), and finally – the ultimate purpose of the whole exercise – you do a risk assessment of each and every client in order to apply the appropriate and proportionate CDD to them.  Logically, therefore, the NRA should be the first step – but in reality nearly all MLROs, whatever their jurisdiction, have had to set about their BRA long before an NRA appeared over the horizon.  It reminds me of the Queen in “Alice in Wonderland”, with her preference for “sentence first – verdict afterward”.

We’ve had a risk-based approach to our in-house AML endeavours since at least 2007, when the FATF published its “Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist Financing: High Level Principles and Procedures”.  But the concept of an NRA did not gain traction until the FATF Recommendations were updated in 2012, when new Recommendation 1 stated that “countries should identify, assess, and understand the money laundering and terrorist financing risks for the country, and should take action, including designating an authority or mechanism to coordinate actions to assess risks, and apply resources, aimed at ensuring the risks are mitigated effectively”.  And in the EU it was not until the arrival of the Fourth Money Laundering Directive in 2015 that an NRA was actually required: “Each Member State shall take appropriate steps to identify, assess, understand and mitigate the risks of money laundering and terrorist financing affecting it, as well as any data protection concerns in that regard.”

There is plenty to read in the new UK NRA but given the timing [black armbands at the ready – 36 hours to go], I thought I would concentrate on the Brexit-y bits.  Interestingly, the word “Brexit” is not mentioned once in the NRA, although “transition period” gets a look-in now and again.  The section on SAMLA concentrates entirely on sanctions and does not mention money laundering at all – no intent is expressed with regard to future AML legislative plans.  We can perhaps take some comfort from this undertaking: “Although the UK has now left the EU, FATF recommendations that were implemented via EU legislation have been retained in UK law under the European Union (Withdrawal) Act 2018.  The UK will continue to meet and exceed FATF standards.”  Sadly, given the UK government’s recent abysmal record for keeping its promises, I’m not holding my breath.  See you next year!

And in case you all thought I was just sitting around between Christmas and new year, reading a book on the filming of “Cranford” and mainlining Montezuma dark chocolate buttons, I can confirm that I have now updated all six of my UK piggy books to be Brexit-compliant.  The covers may be a little tear-stained, but any copies you order from Amazon from today onwards will be the very dernier cri in AML info for your UK staff and NEDs.