Accountants have been warned to expect an increase in AML compliance work in the wake of a new report criticising bodies for a widespread lack of MLR enforcement.
The first report from the Office of Professional Body Anti Money Laundering Supervision (OPBAS) has criticised accountancy bodies for a lack of enforcement action, poor AML record keeping, and prioritising subscription numbers over rigorous supervision.
The review found that across the accountancy and law sectors, 91% of relevant professional supervisory bodies (PBSs) had yet to start or were still in the process of collecting the information they needed to carry out for MLR supervision, 80% lacked the appropriate staff competence and training, and just under half lacked clear AML accountability at a senior level.
Speaking at London’s Royal United Services in March, Alison Barker, the director of specialist supervision at OPBAS, took the accountancy profession’s weak AML compliance to task. “The accountancy sector and many smaller professional bodies focus more on representing their members rather than robustly supervising standards,” she said.
“Partly because they don’t believe – or don’t want to believe – that there is any money laundering in their sector. Partly because they believe that their memberships will walk if they come under scrutiny.”
Barker’s view is backed up by the fact that 92% of accountancy bodies surveyed as part of the report expressed concern about losing members if they are robust in their AML enforcement.
Only 50% of professional bodies issued fines for AML failings last year, with 86% of PBSs preferring to offer support and guidance to members to improve their AML compliance rather than issue penalties.
In her speech, Barker called for a higher standard of supervision.
“Without enforcement how can a professional body show it ‘means business’?” she said. “How can a professional body show its members that meeting standards is a serious requirement? How can clients and consumers be confident in the credibility and integrity of their professional advisers?”
Expect more robust AML supervision?
Reacting to the report in a video blog, ICPA chairman Tony Margaritelli warned accountants in practice to expect increased scrutiny from supervisors over their AML compliance.
“Any minute now our professional body supervisors must react to this and the best way they can react is to ratchet up all their inspections, ratchet up all the work they’re doing, ratchet up the fines and penalties etc. We seriously need to be on our guard about this.”
The Solicitors Regulatory Authority has recently increased its MLR supervision, and AccountingWEB’s resident AML expert David Winch speculated that this may mean accountants are due similar grief from their supervisory bodies.
“In the legal sector, disciplinary functions have been separated from professional support functions. The Law Society is now a separate body from the Solicitors’ Regulatory Authority, but in the accountancy world that has not happened. OPBAS was troubled by the potential conflicts of interests,” said Winch.
“We may not have to wait long to see the professional bodies demonstrating their keenness to upbraid accountants who are not doing enough to comply with the 2017 Money Laundering Regulations.”
The scathing report is the culmination of a year-long supervisory assessment of the 22 professional body supervisors in the accounting and legal sector that OPBAS was formed to oversee.
When the government first introduced OPBAS there was an outcry from some within the profession about another layer of bureaucracy and cost on professional bodies to fund the watchdog. As a recent Any Answers post pondered, the consequence of such a charge may have already come to fruition.
Professional bodies 'not up to snuff’
OPBAS found that some supervisors did not understand their role as an anti-money laundering supervisor; 23% of bodies undertook no form of AML and 18% had not even identified who they needed to supervise.
The watchdog has set its sights on enforcing risk-based supervision of the profession, focusing on the riskiest types of businesses or clients such as tax.
The supervisor of supervisors sees this very much as a step change for many supervisors as over 90% haven’t fully developed a risk-based approach yet. Nor have these supervisors collected the data needed to form a view about their riskiest members and their services.
OPBAS also criticised the professional bodies for their internal weaknesses such as the 80% who lacked appropriate staff competence and training, and a lack of intelligence sharing across the board has led to suspicious activity reports not being raised when they should have been.
According to David Winch, the report shows the PBSs are “not up to snuff”.
“Practitioners – who are being constantly reminded of the importance of adopting a ‘risk-based approach’ to anti-money laundering – will have some wry smiles on their faces when they see that the PBSs are criticised for failing to adopt a ‘risk-based approach’ to AML supervision,” said Winch.
About Richard Hattersley
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