Published Date: 14th March 2019
It has long been speculated that there has been a lighter touch when it comes to non-financial businesses and their response to the money laundering threat. This week a scathing report on the professional body supervisors who oversee the legal and accountancy sector confirmed as much. The report, published by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), goes on to highlight the scale of the problem.
According to the OPBAS report, almost a quarter (23%) of the 22 professional bodies overseen by the ‘supervisor of supervisors’ has no form of AML supervision in place whatsoever. Whilst that is alarming in itself, one in five (18%) had not identified who they need to supervise and a staggering 90% had not fully developed a risk-based approach and collected the data needed to understand their riskiest members and services.
Whilst all professional services businesses are subject to the 2017 Money Laundering Regulations and additional provisions which will come under 5MLD, the sector has traditionally viewed itself as ‘low risk’ when it comes to financial crime, especially amongst the smaller, regional branches of law firms, accountants and estate agents. The latter has particularly been exploited in recent years through property transactions, along with conveyancers, mortgage brokers and lenders.
Alison Barker, Director of Specialist Supervision at the FCA, who was responsible for the review, noted that the standards of supervision over the legal and accountancy sectors in the UK in particular have been “very variable”, and there needs to be “robust action to prevent professionals being used to launder money”.
And she’s not wrong. Illicit money will always flow to the point of least resistance; if the professional services sector fails to implement robust controls, they will always be a primary target for financial criminals attracted by the veneer of credibility they can attain by transacting through a solicitor or accountant.
We can never underestimate how smart the modern financial crime fraternity is, and all professional services providers need to ensure they have robust anti-money laundering compliance and counter-terrorist financing controls in place. Even more important for these smaller, more vulnerable practices is assistance in putting these procedures in place. Supervisory bodies falling under the OPBAS umbrella should provide help in these matters, including ongoing training of front line staff and recommendations for service providers who can help them understand and mitigate their financial crime risk.
Whilst the OPBAS report might be a first step towards these sectors increasing their efforts in this direction – and we hope this will be the case – there may well be some streamlining of the number of regulatory supervisors covering the professional services sector going forward. This could be a welcome change, as highlighted in our report - ‘Money Laundering Exposed – Facing the Threat’ – the multitude of supervisory bodies ultimately results in an inconsistent approach. However we’ll be monitoring this closely and keeping our fingers crossed that it doesn’t result in an overall reduction in resources responsible for AML supervision, as this would leave the UK even more vulnerable to financial criminals entering via the back door.
Author: Michael Harris
Director, Financial Crime Compliance and Reputational Risk
LexisNexis® Risk Solutions