Syed Rahman details the choice the Treasury has made on changing the anti-money laundering and counter-terrorism financing supervisory regime.
HM Treasury has published its consultation response document regarding reform of anti-money laundering and counter-terrorism financing (AML/CTF) supervision.
The document follows the Treasury’s 2023 consultation paper that outlined its proposed reforms.
The current AML/CTF supervisory system is made up of three statutory supervisors - the Financial Conduct Authority (FCA), the Gambling Commission and HM Revenue and Customs (HMRC) - and 22 private sector professional body supervisors that oversee the legal and accountancy sectors. All of these ensure that firms and individuals comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and take enforcement action if any breaches are identified.
After consulting on four possible models for the next AML/CTF regime, the Treasury has chosen the option of creating a single professional services supervisor. This will have consolidated responsibility for AML/CTF supervision of legal, accountancy, and trust and company service providers.
Role
This role is to be given to the FCA, which will supervise all firms carrying out activities within the scope of the 2017 Regulations as providers of legal, accountancy, and trust and company services. The Treasury has said that professional services supervisory bodies will be expected to continue carrying out their wider regulatory and representative roles, including overseeing professional standards. But the Office for Professional Body Anti-Money Laundering Supervision will no longer be needed.
As an explanation for the decision, the Treasury stated:
“The government believes that a public organisation overseeing professional services firms is the most effective approach to AML/CTF supervision of the sector. Integrating professional services into the FCA’s AML/CTF supervisory framework will bring professional services in line with all other sectors in scope of the MLRs, which are already overseen by public bodies, and it will simplify a highly complex regulatory regime.
“This supervisor will have a large remit, supervising all professional services firms. This will enable it to take a risk-based approach across a population of approximately 60,000 regulated firms. This means it can target resources towards the UK’s highest risk accountancy, legal, trust and company service providers, and ensure that lower risk firms receive supervisory attention appropriate to their risk-profile. This is aligned with the government’s wider work to ensure regulators act proportionately.
“A public supervisor with staff dedicated to AML/CTF supervision will be well placed to work with firms, both through information and guidance, and directly during supervisory inspections, to ensure firms understand their obligations under the MLRs.’’
The FCA will not be able to take up its new role until enabling primary legislation has been passed. And the FCA will need to acquire a comprehensive understanding of the AML/CTF risks facing the legal, accounting and company service sectors. The FCA is set to produce a detailed plan for how it will meet its new obligations and has said it will work with the Treasury, HMRC and the relevant professional bodies on the transition. The Treasury is publishing a separate consultation on the powers the FCA will need as the single professional services supervisor.
