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Accountancy bodies slammed for lack of AML action

8th Apr 2019
Editor AccountingWEB
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Magnify glass inspects paper documents

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.”

Year-long assessment

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.

Replies (24)

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By FirstTab
08th Apr 2019 18:21

For once accountancy professional bodies got it right unintentionally. This will now change.

I am not getting paid for policing for Her Majesty's Government.

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By johnhemming
08th Apr 2019 19:24

In a sense this is what OPBAS was created for. I can see this being a bigger issue than MTD. I have been studying it in some detail recently because I am writing some code to handle the processes.

For example


Use of electronic data
5.3.41 A number of subscription services give access to identity-related information. Many of them can be accessed on-line and are often used to replace or supplement paper-based verification checks. Companies House registers of persons of significant control may be used but may not be relied upon in the absence of other supporting evidence.

I read this as meaning people will have to look at the share register for any corporate clients to see if there any PSCs. I don't think this sort of thing is sensible for day to day operations. It is probably sensible for due diligence in a substantial corporate financial transaction, but that is a different issue.

I used to fall into the PEP analysis and I understand the reasoning, but that was a total pain.

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By ireallyshouldknowthisbut
09th Apr 2019 08:54

The trouble is as ever:

1. ID checks are largely pointless, and serious money launderer will have ID good enough to pass our tests.

2. We see little or no results at all from sending in reports of tax dodging, so are reluctant to waste time when our reports are ignored.

Fundamentally tackling fraud and money laundering, is a police matter. They need to take the lead on this, and actually prosecute some people for all the scams that go on, rather than just turn a blind eye. Things like knife crime are more immediate than financial scams, so take the priority, so financial crimes need proper ring fenced funding if they are to have any effect.

Bleating that accounting bodies and their members are not doing enough as unpaid police is simply not going to change anything, nor is threatening jail time or big fines to accounting professionals.

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Replying to ireallyshouldknowthisbut:
By memyself-eye
09th Apr 2019 09:57

Spot on!

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Replying to memyself-eye:
09th Apr 2019 10:04

totally agree

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Replying to ireallyshouldknowthisbut:
By Ammie
09th Apr 2019 10:57


Saved me a lot of typing!

The prisons are full, courts are increasingly more lenient and we have May saying, quote, "we can't arrest out of the problem".

We have bureaucratic individuals and departments managing bureaucracy. Perhaps such should be redeployed in dealing with the problem on the front line.

I trust the MLR procedures in Westminster have been ramped up too, given some of the questionable financial transactions being reported, and they are the ones being reported!!!

I am compliant, but resent every minute I waste on it.

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By lesley.barnes
09th Apr 2019 09:55

I have to agree with the previous posters on this. When accountants come across things that they aren't comfortable with our course of action is send a report and disengage the client.
It would be nice if we at least got an acknowledgement when we sent in a report that is was being looked at. There is no need to divulge the outcome.
What happens now - in all likelihood nothing and the dodgy dealings continue to the next accountant and the next.
We can follow what ever processes are in place, have all the necessary monitoring by our accountancy bodies but nothing will change until HMRC start to act on our reports.

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By tedbuck
09th Apr 2019 10:23

I absolutely agree with the postings. We can send AML reports and they just sit there in someone's in-box and nothing happens. I don't know of anybody who has had a follow up so what is the point of wasting time sending them in?
The scope should be reduced so that only serious suspicions/acts are reported then there might be a better response from the recipients of AML reports.
This is just another way of Governments wasting people's time, creating non-jobs to oversee it and looking for an income source in fines. And then they wring their hands about productivity declining. Are there no people in HMG who can see the end results of what they do?

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By adam.arca
09th Apr 2019 10:36

Well that's a surprise (not).

A brand new quango, which will inevitably be staffed by jobsworths, feels the need to justify its existence by throwing its weight around.

I have no idea whether accountancy bodies and their members are "doing enough" in terms of the responsibilities which were delegated to us without a by your leave, but I am absolutely sure that just because OPBAS says it's so don't make it so.

Let's have some light cast on the whole subject. Like everyone else, I'm fed up performing what appears a pointless job, then receiving absolutely no feedback (either specifically in terms of reports made or generally in terms of how our sector's contribution is helping the fight against crime), then HMG having the gall to moan that we are not doing enough.

Enough what, exactly?

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By rob winder
09th Apr 2019 11:06

"suspicious activity reports not being raised when they should have been." - When they are raised no action is taken anyway. Several years ago I took on a new client after carrying out all of the appropriate checks. It very quickly became apparent he was running a scam company for work and child tax credits. After filing the SAR I rang the NCA for advice on how to kick the client into touch to avoid falling foil of "tipping off" the former client. They were no help whatsoever, and if anything had a **** you attitude, you sort it. I don't know if this case was ever investigated but I know he is still walking the streets and has never been contacted. I'm left feeling why bother going through all the irritation when no one else seems to care.

In this case I have got a rid of a client that was 100% bent and I'm glad to be shot. However, I don't think I should have to be judge, jury and executioner of a client and loose what could be a totally innocent client. Once the SAR has been reported I should be able to continue working with the client until they have been investigated and the NCA/HMRC or whoever tell me they are a wrongun.

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By optimist
09th Apr 2019 11:16

- Companies House should be responsible for all company directors and shareholders - all documentation must be submitted with their next confirmation statement starting 1 January 2020.
- HMRC should be responsible for all submitting a tax return - all taxpayers must submit documentation with their 2019/20 tax return.
- From 31 January 2021, everyone can then place reliance on these entities rather than every professional in the UK wasting their time carrying out admin tasks.

I wonder what would happen if all accountancy firms refused to comply until something was done that was fit for purpose. We are fully compliant but I grudge staff spending time confirming the identity of some old Granny with a rental property.

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By Tom 7000
09th Apr 2019 12:09

22 accountancy bodies. Who new there were so many?

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By Ian McTernan CTA
09th Apr 2019 12:19

It's a cover for the huge increase in fees this year. HMRC are pushing theirs up to £300, CIOT £170, and CIOT are now threatening non-compliance with Disciplinary Board proceedings.

Apparently I need a written AML policy document for myself. Literally, I am a sole practitioner, employ no one- for whose benefit is this for and how will it catch any criminals.

It's become another money grabbing circus without any actual results- I wonder how much has been caught as a direct result of us all having to comply with all this rubbish and in comparison how much it all costs us not only in fees but time and effort.

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Replying to Ian McTernan CTA:
By johnhemming
09th Apr 2019 13:14

Ian McTernan CTA wrote:

Apparently I need a written AML policy document for myself. Literally, I am a sole practitioner, employ no one- for whose benefit is this for and how will it catch any criminals.

There are standard policies available. The danger of these processes is that they try to avoid being prescriptive about process, but end up in a situation that becomes massively more complicated than were they actually to have standard official procedures.

The point I made above about how accountants are not allowed to rely on the shareholder information at company house when working out who is a PSC is an example of something that has been thought up at a remote (I use that word rather than senior) level and is likely to be imposed systemically on people.

I have been doing detailed research and was slightly surprised to find Trinidad and Tobago on a list of countries which require Enhanced Due Diligence. Back in the 1980s I did a bit of programming in Trinidad (on a contract basis).

What I think is an issue with this is that there is no audit trail from the problems to the proposed solutions and it is, therefore, not necessarily the case than implementing the solutions will result in fewer problems.

I do think there needs be an early challenge on some aspects, however, as otherwise they will cause substantial grief. The system is set up to impose the new procedures and that is what it will do. The light at the end of this tunnel looks a bit like an oncoming train.

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Replying to Ian McTernan CTA:
By jan.wolfsbergen
16th Apr 2019 19:03

I'm in a similar situation. I left an in-house job I'd been in for 20+ years and set up on my own to provide a tax return completion service for a number of the partners I have been preparing the tax returns for those 20 years but now have to ID them as I understand it. They are all low risk and have basic tax affairs. The words sledgehammer and nut come to mind.

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By AnnAccountant
09th Apr 2019 13:38

Just out of interest, is Tony's band of non-quals (ICPA) registered as an ML supervisor?

If not, why is he running his mouth on the subject?

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By chasmeehan
09th Apr 2019 14:01

OPBAS was set up to mitigate a negative finding in an otherwise glowing FAFT report for the UK as the largest financial services provider in the world. The negative finding was that "It needs to address certain areas of weakness, such as supervision and the reporting and investigation of suspicious transactions"
The problem identified by OPBAS is that many professional bodies who have the "privilege" of AML Supervision do not have the capabilities in place to discharge that policing role to an acceptable standard. The reason they got the role it was that the Treasury saw tying AML supervision to the bodies role in providing the licence to practise as a member was a cost efficient solution for the UK. Presumably the professional bodies generally also wanted it as a selling point for membership recuitment and to maintain a closed shop; the report suggest that many, presumably often the smaller bodies, did not resource the responsibility adequately. (Not having an AML specialist , an effective internal QA process and rolling AML supervision into practice supervision is all a bit of a giveaway on that) The next step, based on experience elsewhere, is probably that the smaller bodies will need to merge together or be absorbed by a larger, better resourced ones in order to avoid the role and the licencing capability being taken away from them by government bodies because the tie up is seen as critical to enforcement. The problem they face is that members resent the cost and effort and those views may win the battle but lose the war, with members inadvertantly finding themselves supervised punitively with no understanding of their particular niches.

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By Casterbridge Hardy LLP
10th Apr 2019 09:52

A small team of us in the AIA are tasked to visit each and every practitioner to ensure that they are fully compliant with the AML regulations and, indeed, actually enforce them. Some of the members of the team, including myself feel that, to a certain extent we are wasting our time for all of the many reasons that other contributors have detailed so eloquently. We look at the conspicuous absence of compliance endemic in certain other bodies and despair at the biggest problem of all viz the absurd failure of government to tackle the loophole presented by Companies House. Any joker in any part of the world is able to go online and form a company for £20.00p use it and dump it. Seemingly unable to put its own house in order it is ludicrous to heap criticism upon the profession - but I suppose it diverts attention from the important issue of governmental incompetence (and that situation is only worsened by the lamentable performance of H M Revenue and Customs in their "supervisory" capacity when a practitioner is not registered with an appropriate body). No wonder older accountants are throwing in the towel and voting with their feet.

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Replying to Casterbridge Hardy LLP:
By ireallyshouldknowthisbut
09th Apr 2019 16:50

It is interesting to note even those who audit this guff think its pointless.

What we really need is a firm and co-ordinated push back from our representative bodies on this issue.

When things are not working, the answer is not to do it twice as hard, but to consider why its not working, and consider if the original approach makes any sense.

If clearing your windows once a week does not make the sun shine, decreeing we must all clean them daily will not achieve the desired result.

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Replying to ireallyshouldknowthisbut:
By johnhemming
09th Apr 2019 17:04

ireallyshouldknowthisbut wrote:

It is interesting to note even those who audit this guff think its pointless.

I think the key to this is not to argue that everything is pointless but aim to ensure what is done is something that not only has an arguable point, but also evidence that it has a positive effect.

If you argue that no-one should do anything I don't think you would get very far.

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By johnt27
10th Apr 2019 09:56

22 Professional bodies who knew?!

Is anyone else disappointed that the report doesn't name and shame the poorly performing professional bodies?

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By Dandan
10th Apr 2019 14:29

Soon Law and Accountancy will no longer have professionals .

A professional used to be a champion for his/her client. No longer so. Except for the few of them that have resisted, now we just have a bunch of compliant-happy individuals whose comfort zone is to tick boxes. When dealing with client, they wear HMRC's, Treasury's , and Security services' hats.

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Replying to Dandan:
By lesley.barnes
16th Apr 2019 09:22

A tad harsh. As accountants we will still do our best of our clients within the law. We will fight for them if they've done nothing wrong and if they have made a genuine mistake we will do our best to mitigate to consequences. What we can't do is help someone who is purposely involved in dodgy dealings.

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By moneymanager
10th Apr 2019 18:20

The real "big money" is already in the system as third level legitimate business. Not so much in the UK but in the US billions of tax exempt "charity" $ donations are used to fund "party political broadcast" quasi educational outfits and "reserch funding" on bith sides of the pond and our dearly beloved Secretary of State for Housing, Communities and Local Government is set to give the nod of approval to Westminster CCs Victoria Tower Gardens site to ramp it up it here.

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