2020 is just around the corner. A year that’s sure to be filled with bad jokes about clear vision and a wave of puns on eyesight. But short-sighted jokes aside, it’s also set to be a big year for changes in the regulatory environment for everyone.
We’ve taken a look at three major territories to highlight where there’ll be a lot of change.
Regulatory reform is going to be significant across EU territories and it seems like the UK won’t be able to avoid it either. 5AMLD is due for transposition into law for all member states on 10 January 2020, kicking off a great deal of change across popular financial tools. You can listen to our podcast detailing the complexities of 5AMLD here.
From what we’ve heard it seems as though many financial institutions (FIs) are ill-equipped to handle the oncoming changes that 5AMLD will bring. There’s little to no clarity around how registers will work and it’s possible that on the transposition date banks will be granted an extension for compliance while regulators decide how to implement the legislation. We believe a (necessary) extension will be granted so that financial services institutions will be able to respond to the threat of criminal use appropriately.
But with little room to breathe after 5AMLD, it’ll be time for 6AMLD. Due to be transposed in law across EU territories on 3 December 2020, the legislation builds on from the earlier recommendations made by FATF and is set to change the way that many territories process predicate offenses, with a total of 22 predicate offenses defined and required for money laundering.
Luckily, this particular issue shouldn’t represent a great deal of change in jurisdictions like the UK as they operate an all-crimes based system. That means that currently any crime that results in money laundering is treated as a predicate crime.
Although the transposition is 3 December 2020, the implementation isn’t due until 3 June 2021, so we’re expecting to see 6AMLD dominating conversations in European compliance for a long time. Plenty of FIs are sure to welcome the move in principle as 6AMLD harmonizes the definition of money laundering across the EU – reducing risk through regulatory divergence. We’re predicting a difficult time for FIs to implement their new rules around the predicate offenses but an overall boost to their efficacy in handling AML issues.
Across all of this looms the shadow of Brexit. With a government in place in the UK that appears committed to Brexit, it may be that we see a resolution to the issue soon. But no matter what happens with the UK, the subsequent regulatory fallout is currently unknowable – so we expect to see a great deal of debate and conversation around what will happen there as tensions shift during the year.
We’ve commented a few times this year about the increasing use of sanctions as a deterrent in the US economy. That’s likely to continue across 2020 as the current administration seems keen to rely on economic punishment and avoid military intervention for actions by foreign governments that it disagrees with.
The ILLICIT CASH Act will continue to wind its way through the US legislature and with any luck will pass into law. Having recently gained a great deal of support from charities and pressure groups including Amnesty International and Human Rights Watch, it would be great to see this legislation aimed at revealing the owners of shell companies become law.
With the 2020 election campaign coming into full furor from November next year, we expect to see some strong actions coming from the US executive. Being tough on economic crime is one way to prove that. While it’s sure to be a volatile year, there could also be some powerful moves made to showoff the USA’s economic strength. Whether that extends beyond sanctions remains to be seen.
Mexican cartels have been threatened with designation as terrorists and sanctioned as such. However, cartels are already sanctioned under the SDNT and SDNTK labels in OFAC. This change in labeling would see anyone dealing with cartels facing significantly heavier fines than previously. But it’s not clear if there would be any repercussions beyond that.
The fintech scene in Singapore is set to change significantly, the Payment Services Act created a new regulatory framework that works to encourage innovation across the island nation. At a glance, it appears to be inspired by the UK’s FCA regulatory sandboxes. Although the law was passed in January 2019, we think it’s far from having reached its full potential. Working within a flexible regulatory environment is sure to encourage innovation and spur fintech activity in the area.
Sanctions are a running theme for 2020 predictions. The Hong Kong Human Rights Democracy Act in the USA could see severe sanctions happening across Asia and equally severe retaliation from mainland China. It’s a tinderbox for sure and with the trade war between the USA and China finally coming to a close, we predict that there’s going to be a lot of regulatory tumult in the APAC region.
There’s no clear winner in a clash between two of the world’s biggest economies but for businesses operating in Asia, they’re going to need to be able to react fast to what’s sure to be a year with rapid sanctions.
Japan will have to face up to the outcomes of its FATF Mutual Evaluation Report in June. There are a number of concerns that the nation has failed to adequately address criticisms since its last MER, which could result in a potentially embarrassing moment internationally right before the Tokyo Olympics begin. We expect that Japan will do all it can to reduce its exposure but won’t receive a glowing report.
That’s a brief rundown of our predictions for the industry in 2020. But keep your eyes peeled for our 2020 report coming in January, we’re doing a breakdown and close analysis of everything that’s going to matter for the next year.