Quora Answer: Can Brexit Make the UK the Money Laundering Capital of the World?

The following is my answer to a Quora question: “Can Brexit make the UK the money laundering capital of the world?”

London has been one of the major financial centres of the world for centuries.  By virtue of that, it is one of the main cities where money laundering takes place.  Vast sums can only be laundered in cities that have the financial infrastructure to handle those sums.  Bradford City, population 500,000, is never going to be that.

Money laundering requires major financial centres so that the placement, layering and integration of illicit funds can be masked by the volume of licit transactions taking place.  Major financial centres also have the connections to other markets that facilitate the movement of these funds before and after integration.  In that sense, London has been a money laundering “capital” for a long time.

Brexit may have two effects on this.  On one hand, we could conceivably see London decline in importance due to reduced access to the European Union, which would allow rival financial centres to grow, such as Frankfurt, Amsterdam, and Brussels.  This may also, make it less attractive for some sources of illicit funds, particularly from Eastern Europe.  On the other hand, the UK would need to make up for the loss of income due to the trade barriers with the European Union that were previously not there.  This might cause the government to relax reporting standards to attract less savoury sources of funds.  However, this short-term fix would eventually devalue London as a financial centre as well, if it is not eventually curbed.