Changes to UK supervision rules ‘risk encouraging money-laundering’

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Most of the UK government’s plans to overhaul the supervision of anti-money laundering rules would be counter-productive and damaging to the fight against dirty money, accounting bodies have warned.

In a letter to Lords Treasury minister Baroness Joanna Penn, a group representing 13 accounting bodies said the majority of the government’s proposed models for reforming counter-terrorism financing and AML oversight would weaken the UK’s battle against financial crime.

It said three of the four models proposed by the Treasury “carry with them significant risks which at best could see money laundering grow and at worst see the whole supervisory regime collapse”.

The government launched a consultation in June on proposed reforms to the way terrorist financing and money laundering rules are policed.

Under the current regime, 22 professional bodies that supervise the accountancy and legal sectors are responsible for ensuring that firms comply with AML rules and take enforcement action if regulations are breached.

The government put forward four models to shake-up the system, three of which proposed a significant consolidation of supervision into a single public body or a handful of professional bodies.

The other model, which the accounting bodies support, would only result in minor reforms, such as giving the existing Office for Professional Body Anti-Money Laundering Supervision (OPBAS) enhanced powers, but would not change the number or type of supervisors.

OPBAS, an arm of the Financial Conduct Authority, was created in 2017 and oversees the AML work of the 22 professional bodies in the legal and accountancy sectors.

The consultation, which closed in September, expressed no preference between the models.

It comes as ministers and regulators step up efforts to clamp down on money laundering following criticism that the UK has done too little to enforce tougher safeguards against dirty money, earning the City the moniker the London “laundromat”.

The letter to Penn, sent last month by the Accountancy AML Supervisors Group (AASG), said it would be an “enormous administrative task” to ensure money laundering supervision was maintained while a new supervisor was set up.

It added that a “one-size-fits-all approach” would result in a lack of expertise, saying: “The reason there are multiple [professional body supervisors] is because of the sheer scale and variety of supervision that is needed.

“It spans different sectors, professions, and sizes of businesses. This requires the [professional body supervisors] to have a detailed level of knowledge and expertise to supervise firms to a high standard and understand the unique characteristics of the profession they oversee.”

AASG counts the Institute of Chartered Accountants of England and Wales, the professional body for chartered accountants, as one of its members.

A Treasury spokesperson said: “Money laundering and terrorist financing pose significant threats and our review of the UK’s money laundering regulations last year found that — despite improvements in recent years — weaknesses remain in the UK’s supervision regime, meaning that reform is necessary.

“We are considering responses to the consultation carefully and will select a model early next year which will deliver effective supervision over the long term.”