Changes in UK supervision rules “risk encouraging money laundering”

Accounting bodies warned that most of the UK’s plans for overhauling the supervision of anti money laundering rules would be counterproductive and harmful to the fight against dirty cash.

A group of 13 accounting organizations wrote to Lords Treasury Minister Baroness Joanna Penn in a letter saying that the majority models proposed by the government for reforming AML and counter-terrorism funding would weaken UK’s fight against financial crime.

The Treasury said that three of the four proposed models “carry significant risks” which could at best lead to an increase in money laundering and at worst, the collapse of the entire supervisory system.

In June, the government began a consultation on reforms proposed to the way money laundering and terrorist financing rules are enforced.

Under the current regime 22 professional bodies who supervise the legal and accountancy sectors are responsible for ensuring firms adhere to AML regulations and taking enforcement action when regulations are violated.

The government proposed four models for shaking up the system. Three of them suggested a consolidation of supervision in a single public agency or a few 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 is an arm of Financial Conduct Authority that was created in 2017. It oversees AML activities of 22 professional organisations in the legal and accounting sectors.

The consultation that ended in September did not express a preference between the two models.

The City has earned the nickname “the London laundromat” for its efforts to crack down on money laundering.

The Accountancy AML Supervisors Group’s (AASG) letter sent to Penn last month said that it would be a “huge administrative task” for the group to maintain money laundering oversight while a new supervisor is appointed.

The report added that “one size fits all” would lead to a lack in expertise. It said: “The sheer scale and diversity of supervision required is the reason why there are so many [professional body supervisors].

It spans across different industries, professions and business sizes. It is important that [professional body supervisors] have the necessary knowledge and experience to oversee firms at a high level and to understand the unique features of the professions they supervise.

AASG includes the Institute of Chartered Accountants of England and Wales as a member. This is the professional body of chartered accountants.

Treasury spokesperson: “Money Laundering and Terrorist Financing pose significant threats. Our review of UK money laundering regulations in 2013 found that despite recent improvements, weaknesses still remain in the UK supervision regime. Reform is therefore necessary.”

“We carefully consider the responses to the consultation and will select an effective model for long-term supervision early next year.”