A review of Anti-Money Laundering (AML) supervision by HM Treasury has concluded that although technical compliance with AML Regulations (MLRs) has significantly improved, the effectiveness of supervisory interventions across Professional Body Supervisors (PBSs) is inconsistent and there is a big case for reform.
Currently, the AML and counter-terrorism financing (CTF) supervisory system is made up of three statutory supervisors: the Financial Conduct Authority, the Gambling Commission and HMRC and 22 Professional Body Supervisors (PBS) who supervise the legal and accountancy sectors.
The PBS ensure firms and individuals comply with the Money Laundering Regulations (MLRs). They take enforcement actions if the MLRs are breached and ensure only fit and competent individuals hold management roles in regulated businesses.
There is concern that the high number of supervisors risks inconsistency of supervisory interventions and poor information sharing. There are suggestions that some PBSs are not fully independent of the sectors they supervise, meaning that this could potentially impact their development of policies and approach to licensing, compliance and enforcement.
HM Treasury concluded last year that there was a strong rationale for reform of the AML/ CTF supervision regime. It now sets out four overarching models for reform:
• Option 1: enhancing the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) or ‘OPBAS+’.
• Option 2: reducing the number of AML/CTF PBSs.
• Option 3: creating a single AML/CTF supervisor for professional services, replacing the current PBSs.
• Option 4: creating a single AML/CTF supervisor for all sectors.
Turning to each:
- OPBAS+
- The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) was established in 2018 to oversee PBSs. The OPBAS+ model would enhance OPBAS’ ability to perform its current role, without changing the number or type of supervisors. OPBAS’ powers would be strengthened, with the ambition of driving further improvements in the effectiveness of PBS supervision.
- The 22 PBSs would continue to supervise legal and accountancy sector firms for AML/CTF purposes. There would be no change to the remit of the existing statutory supervisors, the FCA, the GC and HMRC.
- PBS Consolidation
- There would be between two and six professional body supervisors with responsibility for AML/CTF supervision in the legal and accountancy sectors. The other professional body supervisors would be removed from the current 22 professional bodies listed in Schedule 1 of the MLRs, and no longer obliged to carry out AML/CTF supervision.
- There are two primary options concerning the number of PBSs that would retain their AML/CTF functions:
- 1) Two PBSs: There would be one PBS in the legal sector and one PBS in the accountancy sector with responsibility for AML/CTF supervision. Both of these organisations would have a UK-wide remit. However, they could have specialist divisions to account for differences in regime in Northern Ireland and Scotland as necessary.
- 2) Six PBSs: There would be one PBS with responsibility for AML/CTF supervision for each of the accountancy and legal sectors in each of three jurisdictions: England and Wales. Scotland. Northern Ireland.
- Single Professional Services Supervisor
- In the legal and accountancy sectors, all professional body supervisors would no longer be AML/CTF supervisors. One organisation (existing or new) would take responsibility for the AML/CTF supervision of all legal and accountancy sector firms. If this role is performed by a public body, all supervision would be carried out by public bodies, which is the primary distinction between models 2 and 3.
- In addition to legal and accountancy sector firms, this organisation could supervise Trust or Company Service Providers (TCSPs) and potentially Estate Agency Businesses and Letting Agency Businesses. Either HMRC could continue to supervise the remaining sectors it currently does, or these could also transfer to the SPSS.
- There would be no change to the supervised populations of the FCA and the GC.
- Single AntiMoney Laundering Supervisor
- All AML/CTF supervision would be done by one body, including the work currently done by the FCA, the GC and HMRC, and the PBSs. There would be no other AML/ CTF supervisors.
- The FCA and the GC would continue to regulate financial services firms and casinos respectively, but not for AML/CTF rules.
- OPBAS would be wound up. All PBSs would be removed from Schedule 1 of the MLRs and would no longer supervise firms for AML/CTF purposes. They would retain their other existing roles including e.g. conduct supervision where applicable.
The preferred format in which to receive responses is via HM Treasury’s online Smart Survey form, which can be found here: https://www.smartsurvey.co.uk/s/S2S0O1/ 9.4 Email responses should be sent to:
HM Treasury says it will make a policy decision on the model for reform after this consultation and publish a response document detailing this decision and the key implementation considerations by Q2 2024.
Notes
The main accounting and tax institutes are all PBSs as are the Law Societies and Bar Association. The list of PBS is as follows:
1. Association of Accounting Technicians
2. Association of Chartered Certified Accountants
3. Association of International Accountants
4. Association of Taxation Technicians
5. Chartered Institute of Legal Executives
6. Chartered Institute of Management Accountants
7. Chartered Institute of Taxation
8. Council for Licensed Conveyancers
9. Faculty of Advocates
10. Faculty Office of the Archbishop of Canterbury
11. General Council of the Bar
12. General Council of the Bar of Northern Ireland
13. Insolvency Practitioners Association
14. Institute of Certified Bookkeepers
15. Institute of Chartered Accountants in England and Wales
16. Institute of Chartered Accountants in Ireland
17. Institute of Chartered Accountants of Scotland
18. Institute of Financial Accountants
19. International Association of Bookkeepers
20. Law Society
21. Law Society of Northern Ireland
22. Law Society of Scotland
Useful guides on this topic
AML Zone
Our Anti-Money Laundering Zone: full of resources for accountants and advisers
AML: Anti-Money Laundering Procedures and Checks
A subscriber guide to Anti-Money Laundering (AML) procedures and checks, including what factors to consider when taking on a new client and conducting your 'know your client' procedures.
Economic Crime Levy
What's the Economic Crime Levy? It is a fixed fee paid by medium and large-sized entities that are subject to Money Laundering Regulations. This includes accountants, auditors and tax advisors. Registration, filing and payment are due by 30 September.
External links
Reform of the Anti-Money Laundering and CounterTerrorism Financing Supervisory Regime
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