Professional bodies oppose disruptive AML reformsby
The accountancy bodies have raised concerns about the “disruption” of a single anti-money laundering regulator, arguing instead to give more powers to the current regulator.
A warning from the accountancy bodies came as Treasury consultation to reform the anti-money laundering (AML) supervisory system closed 30 September.
The consultation set out four potential models to beef up AML supervision, ranging from the creation of a new single AML regulator to single regulators for the accountancy and legal sectors or strengthening the supervisor of supervisors: the Office of Professional Body Anti-money Laundering Supervision (OPBAS).
If the Treasury chooses the single new regulator model, professional bodies and HMRC will be stripped of their AML supervisory powers.
Michelle Giddings, ICAEW’s head of AML, argued that “removing professional bodies from AML supervision risks losing this valuable intelligence”.
Meanwhile, Glenn Collins from the Association of Chartered Certified Accountants (ACCA) wrote recently on AccountingWEB that a single regulator would “increase costs for practitioners and not lead to improved outcomes in the ongoing fight against money laundering”.
Collins added that alongside possible increased costs, the new regulator would add further complexities for members of the professional body in having to deal with yet another regulator and would lead to increased costs “for no clear good purpose”.
The Institute of Chartered Accountants in England and Wales (ICAEW) also warned that a single regulator would disrupt the already existing intelligence-sharing relationships, and could lead to a reduction in awareness and competency of AML risk.
The accountancy body voiced fears that the new regulator could be understaffed if experts from the existing bodies didn’t move across and it would therefore lack the expertise to operate effectively.
Instead, a number of the professional bodies have publicly backed the proposal to enhance the powers of OPBAS, which would carry the least disruption. ICAEW’s Giddings said OPBAS+ delivers “the most feasible and effective way to improve supervision by building on what works”.
She added: “We are concerned that the other options proposed would weaken AML regulation, and risk leaving the door open for criminals to do business in the UK and cause wider damage to the economy.”
Robert Mudge, executive director of regulation at the Institute of Chartered Accountants of Scotland (ICAS), also preferred the OPBAS+ option over the other three models. He argued that it’s the only model that “doesn’t present significant risk to UK’s attempts to tackle financial crime”.
Listing the “dangers” associated with the other three models, Mudge said a new supervisor would take many years to create, which would lead to a “loss of momentum”; a risk of data loss as information from more than 40,000 supervised firms is transferred; increased costs; loss of knowledge; and there is “no guarantee that the chosen model would ultimately be a more effective supervisor for anti-money laundering/combating the financing of terrorism (AML/CFT)”.
None of the accountancy bodies have publicly stepped forward and volunteered to be the single regulator for the sector. The same can’t be said in the legal sector, however. The Legal Services Board (LSB) in its response to the consultation said it would be well placed to act as the single AML supervisory body for the legal sector in the UK.
The LSB claimed that since the economic crime and corporate transparency bill will place “explicit responsibility” on the legal professional body, “the government would be acting entirely consistently with its broader economic crime policy if it were to bring AML supervision for legal services within the auspices of the LSB.”
The legal body went on to say that it supported OPBAS but added that there is an alternative option in “the transfer of those responsibilities to the LSB”.
Reform the system
The consultation was launched following the government’s commitment to the Economic Crime Plan 2023–6 to reform the AML supervisory system. There are currently 22 professional body supervisors supervising across the accountancy and legal sector, alongside the Financial Conduct Authority, the Gambling Commission and HMRC.
AML supervision has faced increased scrutiny as the government has continued to clamp down on money laundering, with professional bodies feeling the wrath of the OPBAS. The varying supervision across the supervisors was picked up by the supervisors of supervisors in its fourth report in April, where OPBAS told some professional bodies to “step up their efforts”.
The consultation closed at the end of September after running since 30 June. The Treasury is currently reviewing the feedback before announcing the next step of the AML reform.