UK AML Reporting Post-Brexit: Top Changes

Brexit has shaken up the UK's Anti-Money Laundering (AML) rules. Here's what you need to know:

1. The UK now has its own AML playbook, ditching EU directives
2. New reporting requirements to UK authorities
3. Updated risk assessment processes
4. Enhanced customer due diligence, especially for EU clients
5. UK-specific sanctions list

Key impacts for businesses:

• Update AML procedures and train staff
• Revise EU client onboarding processes
• Upgrade tech systems for compliance

Quick Comparison: UK vs EU AML Rules

Aspect	UK	EU
Max jail time for money laundering	14 years	4 years
Sanctions authority	Independent	EU-wide
Risk assessment	Country-by-country for EEA	EEA treated as one
Crypto regulation	In progress	Included in 5AMLD

The UK's post-Brexit AML landscape demands swift adaptation from businesses to avoid hefty fines and reputational damage.

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AML Rules Before Brexit

The UK's AML rules were tightly linked to EU regulations before Brexit. The country implemented the first five EU AML directives, which shaped its regulatory landscape.

Here's what the pre-Brexit AML setup looked like:

• The UK followed EU AML directives 1-5
• UK financial firms could easily operate across EU borders
• The UK's AML rules matched EU standards

EU AML Directives: The Backbone of UK Regulations

1. First AML Directive (1991)

Made money laundering illegal and introduced Customer Due Diligence (CDD) and Know Your Customer (KYC) processes.

2. Second AML Directive (2001)

Brought notaries, auditors, and tax advisors into the mix. Required reporting to the Financial Intelligence Unit (FIU).

3. Third AML Directive (2005)

Introduced a risk-based approach and set penalties for AML breaches.

4. Fourth AML Directive (2015)

Focused on transparency and created national registries for Ultimate Beneficial Owners (UBOs).

5. Fifth AML Directive (2018)

Required extra due diligence for high-risk country clients and included cryptocurrency exchanges.

The UK put 5AMLD into action just before Brexit through the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.

Directive	Year	Key Changes
1AMLD	1991	Criminalized money laundering, introduced CDD and KYC
2AMLD	2001	Expanded scope, mandated FIU reporting
3AMLD	2005	Risk-based approach, penalties for breaches
4AMLD	2015	Transparency focus, UBO registries
5AMLD	2018	Enhanced due diligence, included crypto exchanges

Fun fact: The UK skipped the EU's Sixth AML Directive (6AMLD). Why? They felt their own laws already covered most of it.

Main Changes in UK AML Reporting After Brexit

Brexit shook up the UK's Anti-Money Laundering (AML) scene. Here's what's new:

UK Rules Replace EU Ones

The UK now has its own AML playbook. The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) is the star of the show.

What's different?

• UK can slap on sanctions by itself
• More power to freeze assets
• Easier to impose sanctions

New Reporting Rules

Reporting got a makeover:

• Suspect sanctions violations? Tell the Office of Financial Sanctions Implementation (OFSI)
• Focus on UK-based subsidiaries, not EU ones
• Non-restricted trade exemptions? Only for UK-linked deals

Risk Assessment 2.0

Risk assessment got an upgrade:

• Written AML/CFT risk assessments are a must
• Sanctions list risks matter for ALL clients

Customer Checks: New and Improved

Customer due diligence (CDD) is sharper:

• More digging into Ultimate Beneficial Owners (UBOs)
• High-risk country clients? Extra scrutiny

UK's Own Naughty List

The UK now has its own sanctions list. It's not using the EU's anymore.

UK Sanctions List Info
Name
Birth date
Nationality
ID numbers
Last known address

New Sheriffs in Town

• OFSI: Financial sanctions
• Financial Conduct Authority (FCA): AML compliance for financial firms
• HM Revenue & Customs (HMRC): Watches certain sectors like estate agents

"The UK sanctions list is a one-stop shop for details like names, birth dates, nationalities, ID numbers, and last known addresses."

This new setup aims to keep AML standards high while giving the UK more wiggle room.

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What This Means for Businesses

Brexit has shaken up the UK's Anti-Money Laundering (AML) landscape. Here's what companies need to know:

Meeting New Rules

The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) is now the main player. It brings:

• Stricter sanctions
• Quicker asset freezing
• New reporting to the Office of Financial Sanctions Implementation (OFSI)

Businesses must:

1. Update AML procedures

• Appoint a Money Laundering Reporting Officer
• Implement robust Customer Due Diligence checks
• Set up Suspicious Activity Report systems

2. Train staff

3. Upgrade tech systems

• Enhance transaction monitoring
• Improve customer risk assessments
• Streamline reporting to UK authorities

Working with EU Companies

Post-Brexit, EU dealings have changed:

• EU nationals are now "third country" entities
• Extra checks for EEA customers
• New rules for correspondent banking with EEA institutions

This means:

• More paperwork
• Longer processing times
• Possible need for legal advice

Tech and Data Changes

• New data protection rules
• AML software updates needed

Businesses should:

• Review data sharing agreements
• Update AML software
• Implement better fraud detection

"The new UK Trade Sanctions Unit (OFSI) aims to crack down on firms evading sanctions."

The UK wants to cut fraud and cybercrime by 10% by 2025. AML compliance is now a competitive edge.

Recent fines show the stakes:

Company	Fine	Reason
ED&F Man Capital Markets Ltd	£17.2 million	AML failures
Equifax Ltd	£11.1 million	AML failures
Guaranty Trust Bank (UK) Ltd	£7.6 million	AML failures

In 2023, the FCA collected about £53 million in AML-related fines.

The message? Adapt or face consequences. The new AML landscape is tough, but it's also a chance to stand out.

What's Next

The UK's AML landscape is changing after Brexit. Here's what's coming:

UK vs EU Rules

The UK's going its own way:

• No 6th AML Directive (UK says its laws are tough enough)
• Stricter checks on EU nationals
• Quicker asset freezing under SAMLA

FCA's New AML Plans

The FCA's 2024/25 plan has big changes:

1. Tougher enforcement

They're not messing around. In 2023, they hit companies with £53 million in AML fines.

2. Better tech

The FCA's upgrading its systems to catch financial crime faster.

3. Property transparency

A new public register will show overseas companies owning UK property.

4. ESG and financial crime

By late 2024, they'll tackle crime linked to environmental and social issues.

5. Crypto rules

The UK wants to keep crypto innovation going, but safely.

"The FCA will use its powers more to disrupt, chase, and punish those involved in financial crime." - FCA Business Plan 2024/25

What companies need to do:

Area	Action
Tech	Upgrade AML and fraud detection
People	Train on new UK rules
Clients	Check EEA clients' risk again
FCA reports	Get ready for more questions

Bottom line: UK and EU rules are splitting. Companies need to stay sharp and move fast to avoid big fines and bad press.

Wrap-up

Brexit changed UK Anti-Money Laundering (AML) rules. Here's what you should know:

1. UK's Own Path

The UK skipped the EU's 6th AML Directive. Why? It thinks its laws are tough enough already.

UK max jail time for money laundering: 14 years EU max jail time: 4 years

2. New Rules for EU Nationals

EU nationals in the UK are now "third-country" entities for AML checks. More work for UK firms.

3. Sanctions Power

The UK can now make its own sanctions under SAMLA. This might lead to stricter AML rules.

4. Risk Assessment Changes

Firms must check EEA countries' AML laws one by one. No more "EU is fine" rule.

5. More Work for MLROs

Money Laundering Reporting Officers have a bigger job now. They need to check:

• Client relationships
• AML laws in many countries

What This Means for You

Area	Action Needed
EU Clients	Treat as third-country entities
Contracts	Review EU-based deals
Risk Checks	Assess EEA countries individually
Staff	Train on new UK rules
Tech	Update AML systems

The UK and EU are going separate ways on AML. Keep your eyes open and be ready to adapt. The AML world is changing, and you need to keep up.

FAQs

Why did the UK opt out of the EU's sixth money laundering directive?

The UK skipped the EU's sixth money laundering directive (6AMLD) for a few key reasons:

1. Already compliant: The UK felt its laws already covered most of 6AMLD's requirements.

2. Tougher penalties: UK law hits money launderers harder:

Jurisdiction	Max Sentence
UK	14 years
EU (6AMLD)	4 years

3. Wider net: UK law covers more crimes linked to money laundering than 6AMLD.

4. No real benefit: The UK didn't see how 6AMLD would improve its anti-money laundering efforts.

"The UK government chose not to implement the most recent directive into national law because it considered that its domestic legislation 'is already largely compliant with the Directive's measures, and in relation to the offences and sentences set out in the Directive, the UK already goes much further'." - FinTech Global

This move fits with the UK's post-Brexit approach: sticking to its own rules, especially when they're already tough enough.

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