Most STEP members, almost wherever they are based, would probably agree that we are facing a real risk of bureaucratic meltdown. Practitioners have only just negotiated the joys of the US Foreign Account Tax Compliance Act, FATCA, but they must now focus on the Common Reporting Standard, CRS (not forgetting the UK/Crown Dependencies and Overseas Territories inter-governmental agreements). At the same time, many jurisdictions are now beefing up their anti-money laundering (AML) regimes in the wake of the revisions to the Financial Action Task Force international AML standards, with Europe now working on implementing the 4th AML Directive.
On top of all that, many STEP members will also need to think about the new European Markets in Financial Instruments Directive and the additional burdens that will place on investors in terms of registering and reporting.
In this environment STEP practitioners will probably welcome the announcement that the UK government, philosophically committed to cutting regulation and bureaucracy, has launched a so-called ‘Red Tape Challenge’ to see if there is any unnecessary bureaucracy in the AML area. This informal consultation closes on 23 October.
STEP has already made a short submission based on feedback we have received from members (see more). Our submission focuses first on the problems faced by those who don’t fit the normal tick boxes many financial institutions now use for AML checks.
Second, we highlight the growing difficulty many STEP members report in doing business with financial institutions as they switch to a much more risk averse approach.
Finally, we highlight the absurdity that practitioners in the UK now find themselves having to struggle with three different new reporting processes (FATCA/CRS, the Corporate Register of Persons with Significant Control and the Legal Entity Identifier registration process under MiFIR, the Markets in Financial Instruments Regulation). These are all broadly focused on tracking beneficial ownership, but coming through with no attempt at coordination, or to share either the administrative burden or cost.
Of course given that many of the problems we have identified flow from initiatives launched by the current UK administration, it may be politically difficult for the current government to change tack.
Nonetheless, if STEP members want to make their own submissions to the current consultation process, that may add to the pressure for a government philosophically committed to cutting the regulatory burden on business to examine if there any easier ways of achieving its AML policy objectives than those currently on the table.
George Hodgson, Deputy Chief Executive, STEP