Behind every form of organised crime is a case of money laundering.
Criminals are unable to spend their earnings without implicating themselves, but money laundering makes this illegally derived capital appear legitimate, making it useable in the general economy.
This enables terrorists to fund their attacks, and allows drug dealers to live lavishly on the backs of the vulnerable.
Criminal groups looking for ways to launder their money are inherently attracted to weakness, often moving between multiple locations searching for structural deficiencies to exploit. Their cause is helped by the organisation of the global financial system.
The world is now more interconnected than ever, and capital transfers are conducted within the blink of an eye, with large sums of money being exchanged unhindered by physical borders.
As a result, criminals are able to move their funds from jurisdiction to jurisdiction, obscuring its illicit origins.
The loss of intelligence sharing will greatly inhibit the ability of British officials to track and combat illicit flows.The best response to this has been collaborative action, organised at an international level to prevent cases from ‘going cold’ once assets have moved out of the country.
Brexit greatly threatens the UK’s ability to participate in cooperative action, and isolates it from neighbouring nations. As a result, the UK’s money laundering defences will be severely weakened.
Criminals, being attracted to this weakness, will increasingly look to base their operations in the country. With the government then being forced to devote extra resources to this increased criminal activity, there will be less to spend on critical priorities such as policing, education and healthcare.
Europol – the law enforcement agency of the European Union – provides the primary means to organise joint action against crime.
Holding a remit to tackle pan-European criminal threats, a significant portion of its work relates to anti-money laundering efforts.
Europol upholds a criminal intelligence and information database, the Europol Information System (EIS).
The EIS centralises the information within the respective national databases of all 24 Europol members, making them searchable by other states. For example, if Belgian police were investigating a Croatian national, they could consult the database to determine if they had been connected to any other criminal cases within the EU.
This is an effective tool for investigators, as it allows the ‘money trail’ to be followed across multiple nation states, preventing any illicit origins from being hidden.
However, Brexit could greatly affect this, as the UK will be forced to withdraw from Europol. Even in the event of a new Anglo-European bilateral security arrangement being agreed, indications from Brussels suggest that the UK will no longer be able to access the EIS on an unrestricted basis.
The loss of intelligence sharing will greatly inhibit the ability of British officials to track and combat illicit flows.
With money laundering being such a sophisticated crime, to combat it effectively takes equally complex legislation. Criminals will seek to take advantage of any post-Brexit policy weakness or instability, and to prevent this, the UK must align its own anti-money laundering standards with those set by global leaders, such as the US or EU.
The pre-existing relationships that the UK has with the EU suggests that the UK may adopt the standards set by Brussels rather than those of Washington, as compliance with Europe will be necessary for post-Brexit financial interaction.
However, with the UK no longer being a part of the EU, it will lose its ability to help set these standards.
This will hinder the UK’s ability to combat money laundering, as it will not be able to ensure that the threats it faces remain on the European policy agenda.
Criminals gravitate towards areas of weakness and Brexit has the potential to adversely affect the UK’s system of money laundering defences.
With the prospect of 'no deal' looming, the effect would only be intensified should this outcome come to fruition.
In order to ensure that the UK remains at the vanguard of the fight, it should seek to enter into reciprocal data sharing and extradition agreements with neighbouring localities.
It must also resist the urge to lose track of its ethics in pursuit of monetary gain. However, whether this will take place remains to be seen.
Imam Hoque is chief operating officer and global head of product at Quantexa
