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Accountancy bodies trail legal sector in effective AML supervision

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Professional bodies in the legal sector were found to have more effective AML supervision than accountancy professional bodies in the latest report from the Office for Professional Body Anti-money Laundering Supervision (OPBAS). 

30th Sep 2021
Editor AccountingWEB
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The supervisor of AML supervisors has pulled up the effectiveness of the professional bodies’ risk-based approach and in ensuring their members took timely actions, as Covid diverted resources away from supervisory action.  

The third report from OPBAS was released this past week, charting some of the challenges the pandemic created for accountancy bodies in adapting to desk-based anti-money laundering reviews. 

While accountancy bodies come out trailing the legal sector in areas such as implementing an effective risk-based approach, the report also found accountancy bodies excelling in handling conflicts of interest.

Focus on effectiveness

In this report OPBAS concentrated on the effectiveness of professional bodies conducting their AML supervision, building its work last year where it scrutinised the technical requirements professional bodies had in place. 

Since the first report two years ago the supervisor of supervisors has seen “considerable progress” in compliance, but it was under the ‘effectiveness’ microscope OPBAS discovered differing levels of good practice and areas of concern that weren't apparent when assessing the technical requirements.

AML expert David Winch, a director at Bartfields Forensic Accountants and a speaker at AccountingWEB Live Expo, said: “It is interesting to see that OPBAS have moved to asking themselves ‘how effectively are professional body supervisors conducting AML supervision?’ in terms of mitigating the actual risk of money laundering and terrorist financing.

“This is instead of asking themselves ‘how good are the supervisors at checking that firms are complying with the detailed specifics of the regulations?’.”

Accountancy bodies trail legal sector

Several times throughout the report accountancy bodies were specifically called out for improvements. In one example, OPBAS cited 60% of professional bodies in the legal sector were judged effective in using their powers to support their members in taking a risk-based approach to AML, compared with less than 40% of accountancy professional bodies. 

On whether the professional bodies ensured their members took adequate and timely corrective actions, OPBAS went so far as to say, “Overall, we considered the legal sector to have more effective supervision than the accountancy sector.”

OPBAS found half of the professional bodies failed to take timely action to correct gaps in their member’s AML controls, with the blame again pinned more on the accountancy bodies.  

The legal sector also trumped accountancy bodies in being “slightly more effective” in maintaining records and  in ensuring supervisory work and decision making received quality assurance. When it comes to record keeping, 25% of professional bodies were not effective. 

Areas for improvement

But the areas of improvement were not just directed at the accountancy sector. OPBAS highlighted other low effectiveness in both accountancy and legal professional bodies:

  • Governance structures were under question as just over 60% of professional bodies allocated the responsibility for managing AML supervisory activity effectively.
  • Staff in key AML roles lacked expertise, as only a third of professional bodies were found effective in recruiting and retaining staff with relevant experience.
  • Both sectors had inconsistencies in sharing details of misconduct. Although the accountancy sector was more effective in sharing information with other sectors. 
  • Just over 80% of professional bodies had not implemented an effective risk based approach. The report noted that “only a third of professional bodies were effective in developing and recording in writing adequate risk profiles for their sector and a similar proportion in regularly reviewing and appraising risks”.
  • Only a quarter of professional bodies use their enforcement tools successfully. 
  • And more gaps remained in most enforcement structures: “Around two thirds of professional body supervisors didn’t have effective enforcement frameworks. For example, some professional bodies could not explain their criteria for taking enforcement action and which tools would be used,” noted the report. 

Areas of effectiveness

It wasn’t all bad news for the supervisors. The supervisor of supervisors did find that the majority of professional bodies (83%) were effective in guiding their members and helping them to understand their MLR obligations. 

The professional bodies (67%) were also praised for cooperating with other supervisory authorities which helps ensure guidance is joined up. 

While there were gaps in the governance structure, OPBAS did commend the accountancy sector for its effectiveness of handling conflicts of interest that may arise where there is not a separation of advocacy and regulatory functions.

On gathering and investigative powers, all professional bodies were deemed sufficient, with two thirds of accountancy sector bodies using these powers effectively. This was ahead of half the legal sector professional bodies. 

Meanwhile, just over half of PBSs were effective in using a broad range of both proactive and reactive tools for supervision of their members.

Effect of Covid on AML supervision

Like the rest of the profession Covid affected the way professional bodies were able to enforce AML supervision. The supervisor of supervisors found some professional bodies took longer to adjust their usual on-site visits approach for the Covid restrictions. 

The pandemic also put a strain on professional bodies’ resources. The report found some had to divert attention away from AML supervisory activity which put a squeeze on the number of assessments they were able to complete. Others adapted to the demands of the pandemic and amended their risk based approach such as providing updated guidance on alternative methods of customer due diligence verification. 

OPBAS - next steps

OPBAS said its next steps is to continue to improve consistency of intelligence sharing and in encouraging professional bodies to cultivate collaborative relationships. 

OPBAS has been tasked with delivering high standard and consistent AML supervision from the 22 professional bodies across the accountancy and legal sector. However, OPBAS does not cover the supervision by HMRC of accountants who are not members of a professional body.

The first report from the supervisors was published in 2019, where it found a lack of enforcement, poor record keeping and criticised some professional bodies for prioritising member numbers over rigourous supervision. 

At its inception, OPBAS has faced criticism from within the accountancy profession, as some bodies questioned the increased costs coming from the creation of the supervisors of supervisors and its awareness.

The first paragraph of the OPBAS report references the National Risk Assessment’s verdict that the UK’s accountancy and legal sectors are at high risk because of its perceived vulnerability to criminals using professional services to add apparent legitimacy to their operations.

“I am not sure that AccountingWEB members would agree with that assessment of the money laundering risks faced by the majority of accountancy firms,” said AccountingWEB regular Winch. “I suspect many AWEB members perceive the focus of the money laundering requirements to be on causing them to have to identify legitimate businesses and taxpayers, and consider reporting those who fail to fully comply with their tax obligations.”

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Want to keep up with AML? AccountingWEB’s resident AML expert David Winch will be speaking at AccountingWEB Live Expo on 1-2 December 2021 alongside such guests as Rebecca Benneyworth, Peter Rayney, Paul Aplin, Anita Monteith, Carl Reader, Steve Collings, Reza Hooda plus representatives from HMRC. 

AccountingWEB Live Expo takes place on 1-2 December 2021 at Coventry Build Society Arena, Coventry. Registration is now open. A full content programme will be announced in early October enabling you to register for specific sessions. Please visit the AccountingWEB Live Expo website for full details and to sign up to our newsletter.

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Replies (3)

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By JD
01st Oct 2021 13:25

Perhaps they might like to undertake a study of the effectiveness of the NCA. If the information provided is not acted on, or buried by designating what is provided as incomplete (as that is cheaper than employing people to deal with NCA reports) then the collection of that information is pointless.

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By Ian McTernan CTA
01st Oct 2021 15:19

OPBAS. How much does all this AML stuff cost everyone compared to how much is ACTUALLY recovered as a direct result of the AML rules. I and many others would love to know. OPBAS itself must now cost many millions in paper pushing between civil servants to no effect.

What percentage of reports are acted upon?

Is it providing real value for money, or has it mushroomed into something needlessly complex and bureaucratic creating nothing but extra work for pencil pushers without adding value to the economy?

I wonder if we added up all the hours each of us must now spend ticking boxes and complying with AML how many billions of pounds it would add up to. An entire industry has sprung up around this now.

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By Hugo Fair
01st Oct 2021 20:35

It remains a mere tick-box exercise (with all the waste of time and annoyances that this entails) from the perspective of most clients ... the people at whom the core message is presumably aimed, if the objective is to reduce attempts at money-laundering.

When added to the fact that this burden is felt most keenly by those who are law-abiding anyway, it is questionable what metrics are being used to measure effectiveness let alone value-for-money!

I've just been trying to explain to son & daughter-in-law (who have been in the process of buying a house for the last 4 months) why, at the 11th hour, the conveyancer (who has previously lost their bank details twice) is now complaining that one minor deposit account wasn't listed (although showing no interest in the source of substantial recent inflows - which happen to be from the estate of a deceased uncle overseas)!

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