Regulatory bodies must do more to prevent money laundering
Regulatory bodies must do more to improve their supervision of compliance with the Money Laundering Regulations. According to a report published by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) there were ‘significant weaknesses’ in how regulatory bodies approached their role as ‘professional body supervisors’ (PBSs) of anti-money laundering measures.
OPBAS, which oversees the work of nine PBSs in the legal sector and 13 in the accountancy sector, found that more than 80% had failed to implement an effective risk-based approach based on a robust assessment of the money laundering risks faced by the businesses they regulate. Many could not provide adequate evidence that they under-stood these risks well enough to determine the frequency of their supervisory visits and the level of scrutiny required.
PBSs in the legal sector include the law societies and bar councils of the three UK jurisdictions, the Solicitors Regulation Authority (SRA), the Bar Standards Board, the Chartered Institute of Legal Executives, the Council for Licensed Conveyancers, and the Faculty Office of the Archbishop of Canterbury, which supervises notaries.
According to the report, two-thirds of PBSs did not have effective enforcement frameworks. In particular, OPBAS drew attention to statutory limitations on the powers of the SRA, which is required to refer cases to the Solicitors Disciplinary Tribunal if it believes that fines of more than £2,000 are appropriate.
The effectiveness of many PBSs was also limited by unclear governance arrangements. For example, a third did not adequately separate their advocacy and regulatory functions, increasing the possibilities of conflicts of interest.
Overall, OPBAS found that legal PBSs provided more effective supervision than those in the accountancy sector. More than 60% in the legal sector used their powers effectively to support the adoption of a risk-based approach by their members, compared with less than 40% in the accountancy sector.
However, PBSs in the accountancy sector were more effective than in the legal sector at handling conflicts of interest appropriately. In addition, 62% in the accountancy sector made effective use of their information gathering and investigative powers, compared with just half of the legal sector.
In addition to the weaknesses highlighted in the report, OPBAS pointed out some positive achievements by PBSs. Most were effective in providing guidance to help businesses understand their anti-money laundering obligations, and many responded well to Covid-19 challenges, for example by providing updated guidance on alternative methods of customer due diligence verification.
