FCA: Meet your new regulator
The Financial Conduct Authority (FCA) is to take over responsibility for supervising lawyers’ anti-money laundering and counter-terrorism financing (AML/CTF) activities, the government announced today.
The long-awaited decision went against the preference of the profession, while the Solicitors Regulation Authority’s (SRA) bid to become the sole supervisor for all lawyers was rejected
Under the current regime, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) oversees nine legal and 13 accountancy AML supervisors, including the law societies and bar councils of the three UK jurisdictions, called professional body supervisors (PBSs).
In 2023, HM Treasury set out four options for reform: the first was ‘OPBAS+’, with greater powers, including to levy fines – the preference of many legal sector respondents – the second consolidated professional body supervision under a single legal sector supervisor.
The third was to create a new organisation to undertake the task for both lawyers and accountants, while the fourth would expand this body to include other regulated sectors.
HM Treasury has chosen the third option, adding the new role of single professional services supervisor (SPSS) to the responsibilities of the FCA. This covers legal services, accountancy services, and trust and company service providers.
It means that all regulated lawyers covered by the Money Laundering Regulations 2017 (MLRs) will have two regulators – the FCA for AML activities and their existing regulator (the SRA, Bar Standards Board, Council for Licensed Conveyancers or CILEx Regulation) for everything else.
The Treasury said it and the FCA would work with PBSs “to minimise duplication in registration processes, fee payments, and other administrative matters”. Some 6,500 SRA-regulated firms are within the scope of the MLR.
It said the FCA, as a public corporation, had “the appropriate degree of independence from ministers” – a concern raised by the legal sector in particular.
Implementation is subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a “detailed transition and delivery plan”.
The Treasury said this meant the date on which the FCA would take over supervision was “heavily dependent on the availability of parliamentary time”.
Next month, it will issue a consultation on the powers that the supervisor should have.
“The government believes that a public organisation overseeing professional services firms is the most effective approach to AML/CTF supervision of the sector,” the Treasury said.
“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.”
HM Treasury said its intention was that the FCA would build “specific expertise in the particularities of each sector it supervises”. This included issues such as legal privilege, “the importance of which we recognise”.
It added that the FCA would be equipped to take “strong enforcement action where it is necessary, ensuring there is a clear incentive to comply and that robust action is taken against the minority of wilfully negligent or complicit firms”.
The Treasury insisted that this was a “simplifying reform” and did not change firms’ obligations under the MLRs. “Firms that are already compliant should not need to make changes to their AML/CTF controls.”
The FCA’s fees would be “fair and proportionate”, although there would be “some familiarisation costs to businesses where, for instance, the FCA has a new IT system with which firms interact”.
It did not go against the preference of the profession, which abhors the double standards of the SRA in all its regulatory roles and particularly its draconian AML fining, which picks on the low-hanging fruit while they describe their own disastrous conduct, for which we all must pay, as historical. The SRA is an inept regulator and the profession, as you put it, would prefer to be regulated by just about anybody that has a true understanding of and respect for the actual old-style solicitors it regulates