Brexit – Making Britain Great Again



The more I read into the arguments put forward by the leave campaign who are rejoicing over the “win” that they have just accomplished the more I compare them to the businessman running for the US presidency. Trump’s motto “lets make America great again” seems to have been copied by the leave campaigners who have a motto “lets make Britain great again”. What a role model to choose!

They propose to do so by having more control over their laws and to decide better on how to spend their money. This sort of “centre of world” and “us versus them” mentality seems to be coming from the disillusion of the older generation of the Brits who still dream of the glory days of the British Empire. In actual fact no state is ever totally independent nowadays since they all depend on one another to one extent or another. The more trading partners a state has, the more its economy will grow and the more its people will prosper. Whether the UK admits it or not it needs to trade with Europe as much as Europe needs to trade with the UK.

So ultimately the British will need to negotiate trade agreements that will most likely be as similar as possible to the current agreements in place. The main difference will be that it will cost the UK a lot of money to renegotiate everything. It seems like all of the world understood this concept except the older generation of the Brits who are still disillusioned by the British Empire mentality. Time will tell if it was a good move or not, what is clear is that the students and young generation who will have to deal with it all definitely did not agree that it would be better to be out.

The Financial Sector and Passporting Rights

The financial sector would definitely be one of the hardest hit sectors as a result of the Brexit. We saw this clearly with prices of the banking stocks around the world taking such a big hit on Friday 24th, the day the results were announced. London is a very important financial hub that is a gateway for many non-EU countries. A big advantage that the EU offers in the financial services sector is the right to passport a license. What this means is that an entity that is regulated in the UK can very easily acquire Passporting rights to operate in the other EU jurisdictions without needing to acquire full licensing in each member state. So for example, if Morgan Stanley has a fund licensed in the UK it can easily and cheaply get permission to promote and sell it in the other jurisdictions with the blessing of each jurisdictions’ regulator.

Since the UK has just voted to leave the EU the passporting right no longer applies to UK regulated entities and products. Thus sticking to our example, Morgan Stanley would have to go to another member state and get its product fully licensed there and then can passport it to the other states. What this means – London just became much less attractive to use as a hub and other jurisdictions will benefit from this.

The people who voted to leave the EU, who were mainly the older generation and people from the North might be thinking, we don’t care about the bankers and high earners working in London. Serves them right to lose their jobs after all we have done to bail them out in the crisis. This of course is the one of the most idiotic arguments one can make and again we see a likeness of the mentality of the leave campaign to Donald Trump. In simple terms: banking sector does bad = whole economy does bad = fall in purchasing power. Who will pay for this all? The tax payer as usual. So the hard working Brits (who either voted to leave the EU or who applied a little logic and voted to stay in) will pay the price for it all.

Who will gain most from Brexit?

First we have the politicians who have used the Brexit to their advantage. People like Nigel Farage and Boris Johnson who I am sure made a bucket load of money from all this and have gained more support that will see them advance in their political career. Then we have the consultancy firms who will be in high demand by both the private sector and the government entities themselves to see how the Brexit will actually affect them. Finally we have China. With a weaker union and a smaller EU block China gains in the long term by attracting more trade towards its jurisdiction and away from Europe. So congratulations to the Brits who voted to exit Europe – you have just made the politicians, lawyers, accountants, other consultants and the Chinese very happy indeed.

The Bottom Line

Ultimately billions of pounds will be spent in relation to the transition to the free “independent” UK. So most of the gains that the Brits thought they would save by not being an EU member would still be spent on new negotiations and added costs of trading. Animosity is clearly present within “great” Britain with speculation that Northern Ireland and Scotland might seek independence in order to remain in the EU. We even have petitioning for London to be declared a separate state and also remind in the EU. I will close the post on a light note however. In one of the interviews with Nigel Farage after the Brexit result in which he admitted that he had twisted words about NHS funding he also stated that Britain should consider more trade with the Commonwealth. Please check out this humorous clip in relation to the notion of the Commonwealth and “great” Britain:

MLRO: Friend or Foe?

Money Laundering

A Money Laundering Reporting Officer (MLRO) is responsible to ensure that the company they work for is compliant on aspects of Anti Money Laundering (AML) and Countering the Financing of Terrorism (CFT). Having just attended a 2 day seminar on AML, which for a change was not a total waste of time, I was inspired to write a post on the position of an MLRO. A person occupying this role can be considered as both a great friend and a great enemy by their colleagues.


The friend part comes from the point of view that a good MLRO will ensure that the business is abiding by the AML laws and regulations. Besides meaning that the entity would be compliant, it also means that the business is not taking on any unnecessary business risks. An effective MLRO would have in place robust systems and procedures to ensure the entity they are working with is covered from all angles. This involves detailed written procedures that everyone in the organisation is made well aware of. It is useless to have the best system possible for your particular business but then the people who have client contact are not made aware of the system. Thus, regular and effective internal training is necessary in order for the MLRO to explain to the people working in the organisation about their duties and responsibilities from an AML point of view.

In order to have an effective system the MLRO has to be approachable and people have to be made aware of who the MLRO actually is. Although the MLRO must be a senior officer within the company, they cannot be just sitting in a head office with nobody on the ground floor knowing who they are. Also, simply sending an email with the company’s AML manual or giving an employee a copy of such manual is not enough. Most people would simply ignore it or read it once and just dismiss it. So the MLRO must find a way to get people interested in the work they do and get them to understand its importance.

An easy way to do this is to simply explain how an AML breach could be detrimental to the person’s job and the whole organisation’s existence. The fine that the entity might receive if it is in breach of AML rules and regulations is just one aspect – the reputational risk of the entity could perhaps be the largest risk factor. So if colleagues see their MLRO as the one who helps them stay in check and avoid costly risks they will see them as a friend.


Of course, like with anything to do with compliance it is much more common to look at the MLRO as the enemy. From the point of view of directors and shareholders the MLRO, like the Compliance Officer could easily be regarded as being an extra expense that causes more expenses and disruption of potential business. While senior management might want to take on a risky client and try to justify the risk-reward trade off of doing so, the MLRO would be the person to highlight the risk part and perhaps seen as exaggerating this aspect.

From the point of view of the people who are actually in contact with clients the MLRO could be the one that would bar them from pursuing certain potentially lucrative client accounts. They could also look at the MLRO as the person who is forcing them to get a stack of useless paperwork on a client that they have known for years that could cause the business to lose such a client.

To be fair certain MLROs do not make it easy on themselves and tend to be too strict and annoying in their pursuit of carrying out their duties. Just because an MLRO needs to be sure that absolutely everyone is covering all aspects of the AML rules it does not mean that they should be policing their colleagues in an antagonising and perverse manner. If people see their MLRO as the enemy the system will not work effectively and mistakes and oversights would be inevitable.

Furthermore, if an MLRO is over-reaching and going over and above the requirements then they would definitely be seen as the enemy. Over stepping and being extra safe is also bad for business. No profits can be made without certain risks and if an MLRO is holding back business due to over-reaching and trying to be holier than the Pope, then it will ultimately back fire through loss of good business. I am a great opponent of over-regulation, which can be either brought upon by regulators or by the people who are in charge of enforcing the regulation within organisations.

Finding a Balance

The key is to finding a balance. Unfortunately being seen as an enemy and a necessary evil that comes with the job. The MLRO must recognise that it is not his/her responsibility to decide what degree of risk a company would like to take. That decision remains always at the discretion of the directors who are responsible for the overall direction of the business. However it is the MLROs job to notify top management about the risks involved from an AML perspective and to work with them to develop the best working environment.

A very interesting exercise that was undertaken during the seminar I recently attended was to divide participants into groups and work on a case study. The case study involved coming up with a scheme on how to launder €150Mln for a multi-national consortium. The beauty of the exercise was that it put people who are responsible for counteracting money laundering on the other side of the situation. The game helps one appreciate the level of complexity that is needed and the mind frame that launderers would be in. It ultimately will help in finding loopholes in the system of the company that each participant works in. So the exercise helps people learn by putting themselves in their counterparty’s situation. I believe this is an interesting and effective method that an MLRO could use in getting the AML message across to people.

Does the Regulator play a Role?

The Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU) are the regulators that authorise and monitor the work of MLROs. Do they have a role to play in the effectiveness of the work of the MLRO? The simple answer is yes, but one must not end up “depending” on the regulator to do something. Although there is a requirement for the MLRO to present an annual report to the FIAU which also includes training received and conducted there is no specification of what is actually required. So in November and December it is a common practice to see many AML “training” programs which would suffice for the purposes of filling in the MLRO training requirements.

Of course one can argue that from year to year they would still remember the laws and regulations and if there are new ones they can easily read up on them on their own. With this I agree 100% and find the “training” courses that simply go through the legislation as utterly boring and useless. In my view, it would make much more sense if the training required involved something more. Something with practical examples, case studies and something that is more interesting than watching paint dry on a humid day! It would make sense to use practical examples that have actually happened locally and training has to be targeted depending on the type of business. An MLRO of a bank has a totally different situation compared to an MLRO of an investment service company or and MLRO of a real estate agency. So having group training sessions is definitely not the ideal setting.

The Bottom Line

Whether we like them or not the MLROs do play an important role in the organisation. There is no secret formula that works for every organisation, but each MLRO has to adopt a risk-based approach to cover the issues that affect their organisation. Undoubtedly the MLRO needs to understand their organisation very well and they need to identify the weaknesses that exist from an AML perspective. However this is not enough, any system and procedures they develop are only as good as far as how they are implemented. Thus, MLROs need to find a way to monitor and incentivise the people with client dealings and transaction processing so that they actually implement the AML measures.