Mark Taylor
Senior Editorial Manager
The UK is heading to the polls on 4 July after Prime Minister Rishi Sunak called an early general election.
In dissolving Parliament ahead of a vote, any unfinished business, including bills and draft secondary legislation not enacted, falls away unless passed in the period known as ‘wash-up’.
With Prime Minister Sunak acting early and leaving very little time for any other business, nothing except the most advanced bills survived.
Regulators also down tools during the pre-election window, and we can expect little in the way of new policy statements, rule changes, or new consultations.
From July 5 onwards, however, things may look very different.
Here’s what the snap announcement means for financial services.
The UK GDPR is dead (for now)
One such casualty of the wash-up was the UK’s attempts to create its own equivalent of the European Union General Data Protection Regulation (GDPR).
The Data Protection and Digital Information Bill (DPDI) will not become law unless revived in the future.
It aimed to shape the UK’s post-Brexit data protection regime and create a statutory basis for new "smart data" regimes in different sectors.
It also planned to put digital identity verification services onto a statutory footing and introduced regulation of providers of these services.
“The DPDI Bill would have provided the legal basis for government and regulatory schemes to introduce smart data across our economy,” said the policy team at the top fintech industry association Innovate Finance. “This must be a top priority for the next government.”
Crypto plans snagged
The UK has spent the last few years promoting itself as a major crypto hub. It has promised legislation to regulate crypto assets, proper guardrails for crypto and blockchain businesses to innovate safely, and the creation of a digital pound.
None of the above have materialised, and with the prospect of an entirely new government incoming, could face a long way back to the ministerial agenda.
The most likely of the UK’s crypto plans to advance in the coming year is the regulation of stablecoins, which was due to be announced as secondary legislation until Parliament ran out of time.
Like similar secondary items, it has been kicked into the long grass.
Insurance sees cause for optimism
Analysts at J.P. Morgan said a new government could trigger positive regulatory change that would boost the country’s insurance industry.
Reforms to workplace pensions and the UK’s Solvency regime are likely to be significant undertakings regardless of which party assumes power.
Representatives from the Lloyd’s Market Association (LMA) and the London Market Group (LMG) said a new UK government should back the country’s financial services to support the Lloyd’s market’s significance and continuous growth.
Financial crime commitments
Tough on financial crime, tough on the causes of financial crime.
Should it win power, Labour has said it wants to tighten money laundering laws, give payouts for whistleblowing, and launch an international anti-corruption court.
The UK currently does not award whistleblowers compensation, however, Labour plans to change that with a reward of up to 25% of fines imposed on sanctioned individuals and entities.
The UK has made bold promises to tackle financial crime and dirty money many times over the last decade, however, successive governments have failed to implement effective laws, experts said.
Regardless of the outcome of the July 2024 general election, the next government is almost certain to introduce more legislation for banks to contend with.
“Cracking down on money laundering in the UK has the potential to deliver more transparency, but it doesn’t address the whole picture,” said Ted Datta, Senior Director, Financial Crime Industry at Moody’s Ratings Agency.
“Whistleblowing rewards for reporting on sanction breaches incentivise identification, but the challenges of spotting sanction breaches when bad actors use so many methods for hiding them still remain for organisations.”
He said it should be simple to answer the question ‘Who are you doing business with?’ but the reality is “far more complex” for firms today.
“Companies can face significant challenges in acquiring the insights they need to make decisions; navigating opaque corporate ownership structures, including shell companies; and finding where true control lies within an entity that criminals are deliberately obfuscating.”
A lack of insight ultimately leads to more opportunities for money to be laundered and can make reporting hard, Datta said.
“To ensure any regulatory anti-money laundering (AML) agenda is effective, comprehensive data from a range of sources needs to be brought together in meaningful ways to help paint a picture of risk associated with bad actors and the flow of dirty money,” he said.
What happens if the UK elects a new government?
Early indications put the opposition Labour Party on course for victory, but experts say radical reform is unlikely even in the event of a landslide and totally new government mandate.
“However, it would be a mistake to think that a new government would mean no change. History has shown that this is never how things turn out,” said Jonathan Herbst, global head of financial services regulation at law firm Norton Rose Fulbright.
“To name a few areas of potential change, Labour has already indicated that it is planning more intervention to encourage domestic investment and the UK capital markets, and looks like it will double down on the consumer agenda and encouraging a broader regional spread of jobs in financial services. It also seems more open to following EU regulatory change where this makes sense for the UK. So, there could be a lot for the sector to unpack if Labour comes to power.”
“We hope that a new government will ensure that the UK’s regulators meet their objectives to support UK financial services to remain globally competitive,” said Sheila Cameron, CEO of the LMA. “We hope any new government looks to ensure that regulation is proportionate to the risk and the buyer.
CUBE comment
Elections add uncertainty and volatility to business planning at the best of times.
For the UK, the current state of economic flux in which the country finds itself lends further weight to the significance of the July poll and what comes later.
The snap element meant the end of several bills and secondary legislation chalked up for the financial services sector.
There is a chance the next government will pick up where an incumbent left off, but the policy objectives would have to be introduced over again as new bills or regulations.
A new government may also want to present its own ideas, and it is not obligated to continue drafting legislation that did not make it through the wash-up.
If anything does survive, such as stablecoin regulation, it may be substantially altered by the new government.
For regulated businesses, the need to stay attuned to policy thinking and updates during times of great upheaval is mission-critical.
CUBE is uniquely positioned to help large, complex organisations understand regulatory compliance and manage change in a way that sets their business for sustained success.