The decision on 23rd June 2016 by British voters to cease membership of the European Union had a profound and immediate effect on the financial markets. “Brexit” is still in its early stages, with much uncertainty surrounding it. The process attracted further uncertainty on 3rd November 2016 when the Divisional Court

ruled that the Government could not use its prerogative powers unilaterally to trigger Article 50 of the Treaty on European Union and cause the separation from the European Union. The Court ruled that only Parliament has authority to decide the issue of when (if at all, it now seems) the United Kingdom could divorce itself from the European Union. The Government has indicated that it intends to appeal the Court’s decision.

Although we know that the Government intends (if the Supreme Court allows its appeal) to trigger the formal process of leaving the European Union by the end of March 2017, the pace and the extent to which this will have an effect on United Kingdom legislation remains unclear. Despite repeated calls from opposition politicians there has been little direction or policy proposal so far expounded by the Government.

Below we consider three areas in which the United Kingdom’s exit from the European Union could affect the regulatory and enforcement environment in respect of economic crime. In particular change may be expected in:

1) legislation;

2) the effect of economic uncertainty on the prevalence of economic crime; and

3) the United Kingdom's relationship with European Union law enforcement bodies and its ability to remain a strong actor against economic crime.

LEGISLATION

It is unlikely, in the short term, that the United Kingdom’s withdrawal from the European Union will have any effect on United Kingdom legislation. However, once the United Kingdom has formally withdrawn from the European Union (by the engagement of Article 50) the United Kingdom will no longer be bound to implement or enact European legislation. One area in which this is likely to have a particular impact is in relation to trade and economic sanctions, an area in which a large number of European Union regulations are in force. Currently the United Kingdom is bound by international obligations to implement United Nations and European Union measures concerning trade and economic sanctions.

Although European Union regulations currently have direct effect in the United Kingdom, legislation is required in order to create criminal liability from them (such as in respect of economic and trade sanctions). Following withdrawal from the European Union the United Kingdom could elect to mirror developments in European regulations, but would no longer be bound to them. The United Kingdom could opt to repeal existing legislation that arises from European Union regulations, but it is by no means a foregone conclusion that this would occur and it would be more likely that the immediate response would be for existing European legislation enacted in the United Kingdom to remain in force with a timetable set to review the continuation of individual enactments. Obligations arising from membership of the United Nations will be unaffected.

In addition to European Union regulations, there remains uncertainty over whether the United Kingdom would continue to implement European Union directives. This could affect the United Kingdom’s approach to implementing the Fourth Money Laundering Directive. However, it is unlikely that the United Kingdom would directly benefit from being seen as weakening its approach to economic crime.

ECONOMIC UNCERTAINTY

Given the promises from the current Government to crack down on corruption and bribery, evidenced in the Attorney General’s address to the Cambridge Symposium on Economic Crime in which he explained that dealing with economic crime is a “Government priority”, any relaxation of regulation and enforcement would run contrary to the Government’s aspirations.

A unilateral relaxation of financial regulation would also make the United Kingdom’s trading relationship with the European Union difficult. Access to the single market as an EEA member would undoubtedly require the United Kingdom’s compliance (or at least near-parity) with European Union law. Likewise, any other bilateral or multilateral trade agreements are likely to require the United Kingdom to adopt regulatory standards equivalent to the other contracting States. In order to ensure that London retains its place in the global financial markets it would make sense for the United Kingdom to maintain a close connection to the European financial markets. Therefore, it is likely to remain in the United Kingdom’s best interests to maintain a strong regulatory environment.

RELATIONSHIP WITH EUROPEAN UNION LAW ENFORCEMENT BODIES

During pre-election arguments, those campaigning to remain in the European Union cited a lack of intelligence-sharing as a reason why the United Kingdom should remain in the Union. There remain concerns over how Brexit will affect the SFO and NCA’s roles as effective intelligence gathering bodies in the fight against corruption.

Whilst Mutual Administrative Assistance between different nations would likely continue unaffected, securing admissible evidence through formal Mutual Legal Assistance may be delayed. The ease with which United Kingdom law enforcement and intelligence agencies are able to conduct joint investigations with other European agencies is also likely to be impacted by Brexit. It is likely that notifications of individuals of interest crossing borders from Europe into the United Kingdom will be less efficient, and the restraint, confiscation and recovery of assets across EU/UK borders may be effected less simply than under current agreements.

Whilst these issues are less likely to grab headlines than issues concerning migration they should, nonetheless be at the forefront of the Government’s considerations when ensuring the best possible deal for the United Kingdom’s exit from the European Union.