Professional Body Supervisors (PBSs) who oversee anti-money laundering (AML) regulations and compliance in the legal and accountancy sectors are falling short of their obligations, a new study has found.
The report by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) found that there remains a “lack of full and consistent effectiveness across the PBSs we assessed this year, with none yet fully effective in all OPBAS sourcebook areas”.
OPBAS is housed within the FCA and is responsible for supervising 25 PBSs for anti-money laundering purposes in the legal and accountancy sector.
Its fifth report, published at the end of September, provides an overview of the PBSs’ AML supervision as of July 2024 based on evidence from assessments of nine PBSs and additional activities undertaken in the 2023/24 supervisory cycle.
It also draws on various secondary sources, including the Treasury’s 2022/23 report, Regulation 46A reports, and data from the National Crime Agency (NCA) about Suspicious Activity Reports (SARs).
The OPBAS Progress Report 2023/2024 highlighted several key areas for improvement. These included:
- Overall effectiveness. OPBAS has not seen any material improvement in PBSs’ effectiveness in the core areas of supervision, risk-based approach, enforcement, and information and intelligence sharing. Of the nine PBSs OPBAS assessed, most had marginally declined or remained static in overall effectiveness.
- Risk-based approach. Problems in applying a risk-based approach reduced the effectiveness of PBSs’ supervision. Many PBSs could not clearly substantiate the risk profiles they had assigned to their members or had used a narrow set of indicators to categorise risks.
- AML supervision. Weaknesses remain in AML supervision. Shortcomings were noted in the design of some supervisory approaches, lacking clearly defined methodology and effective use of tools to supervise members.
- Enforcement approaches. Continued gaps exist in enforcement approaches. PBSs have a range of enforcement powers and tools, but the majority OPBAS assessed did not use them “effectively in a dissuasive and proportionate manner”.
- Intelligence sharing. PBSs’ commitment to consistent, proactive information and intelligence sharing continues to be a concern. While some PBSs have made efforts to improve in this area in the last year, there is still too much inconsistency.
- Inadequate resources dedicated to AML. Not all PBSs are prioritising and resourcing their AML supervisory function appropriately. A “significant proportion” of PBSs outsourced their AML inspections and many PBSs are not sufficiently resourcing their AML supervisory function which reduces effectiveness.
Andrea Bowe, Director, Specialists at FCA, said: “The FCA is committed to playing a leading role in reducing and preventing financial crime. Through OPBAS, we have intervened to tackle failings where we have found them.
“However, we are still not seeing the consistent, effective improvement we need.”
OPBAS expects PBSs “to continue investing in and strengthening their AML supervision to have the greatest impact on preventing financial crime,” said the report.
“PBSs should be demonstrably reducing the risk of illicit funds in the UK by taking increasingly proactive and effective interventions among their populations. To achieve this many PBSs will have to do much more to improve their current approach.”
OPBAS has pledged to maintain its focus on multi-PBS work in areas of identified weaknesses to ensure PBSs effectively incorporate lessons from the regulator’s risk-based projects into their supervisory approaches.
The regulatory body has also said it will continue to support the Economic Crime Plan 2 actions to strengthen the current AML supervisory regime and continue to engage with international partners, including the Financial Action Task Force (FATF), to share information and best practice.
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