Pitt-Watson: Fees will be proportionate
The Financial Conduct Authority (FCA) expects to start overseeing the anti-money laundering efforts of some lawyers “before the end of 2028”, the government has said.
Treasury minister Lord Pitt-Watson declined to say how much the transition would cost firms but said “I do not think that there will be a materially greater cost once the move is made”.
He made the comments during the House of Lords report stage of the Financial Services and Markets Bill, the legislation that will enable the FCA to take over supervision for lawyers, accountants and trust and company services providers from their individual regulators.
Responding to probing amendments laid by Liberal Democrat Treasury spokeswoman Baroness Kramer, which highlighted the lack of an implementation timetable, he said: “The current expectation is that the first businesses will begin to be supervised by the FCA before the end of 2028.
“Further onboarding will take place in phases, with the broad aim that all firms within scope will be supervised by the FCA by mid-2030.
“Implementation should proceed only when the necessary preparations are complete. This includes ensuring that appropriate systems and effective information-sharing arrangements are in place, supervisory staff are adequately trained, and sufficient clarity is provided to firms about the future regime.”
Baroness Kramer reported that peers “have received representation from a wide range of professional groups which are, frankly, utterly dismayed” by the move.
“They recognise that the FCA is trying to respond to their needs and issues, but it seems to have very little idea how to fund or resource the complex guidance and education required as part of that supervisory and monitoring process.
“It seems, as far as I can understand, that the FCA now says that it would like the professional bodies themselves to continue to provide all that work but, in essence, on an unpaid basis. That is not realistic.
“The FCA has produced a high-level road map, but I hear universally that it is very short of information and low on timing details.”
Baroness Kramer agreed that the current system has “historically suffered from fragmentation”, but suggested the reform was out of proportion, saying the issue was being dealt with “reasonably effectively” by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS).
She went on: “There is real concern now that with an additional layer of supervision brought into the picture, fees are going to increase very significantly.”
Crossbencher Lord Vaux of Harrowden outlined his concern that firms would have to deal with two regulators in future.
“It seems inevitable that this will have cost impacts for those firms even if, as the FCA argues, the regulatory rules themselves will not change. That is likely to be especially true for smaller firms.
“The impact assessment that accompanies the bill on this section is, frankly, almost laughably poor, relying almost entirely on the statement that the AML rules themselves will not change. It does not address, in any meaningful way, the question of moving from one supervisor to two.”
But pressed on this issue, Lord Pitt-Watson said: “I am not aware of an individual calculation that has been done for that. I do not think that there will be a materially greater cost once the move is made.
“The key issue that we are trying to address here is that, right now, we have 23 regulators of AML, and that job needs to be done in a more co-ordinated and consistent fashion.”
The FCA would consult on its future fee model before starting work as the supervisor. “The government expect fees to be proportionate and consistent with the FCA’s wider fee framework, where smaller firms generally face lower costs than larger firms.”
Shadow Treasury minister Lord Altrincham said he was aware of “serious concerns” about how the transition was being communicated and how the new regime would work in practice.
Lord Pitt-Watson said: “This reform is not about applying a banking-style or one-size-fits-all supervisory model to professional services firms.
“The future regime will be proportionate and risk-based and establish a more consistent and effective framework, while recognising the different characteristics and risks of those sectors.”
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