Rathi: Deeper joint working is vital
The government is set to legislate to transfer the anti-money laundering supervision of lawyers to the Financial Conduct Authority (FCA), it has emerged.
As we reported yesterday [1], there was nothing specific about it in Wednesday’s King’s Speech, raising questions about whether and when it might happen.
But it is now believed that the Enhancing Financial Services Bill will be the vehicle for the changes.
HM Treasury sources are saying that the majority of the necessary legislative changes will be made via secondary legislation in due course.
The measures in the bill will ensure that the government has the necessary powers to make these changes, particularly in regard to information sharing and cooperation between the FCA and the professional bodies, such as the Solicitors Regulation Authority.
It will also confirm that the Treasury is able to provide the FCA with the start-up funding it will need for the implementation period.
An HM Treasury spokesman declined to confirm this when contacted by Legal Futures.
The move to the FCA is widely unpopular with the legal profession but outside observers support it.
Dr Helen Taylor, deputy director at Spotlight on Corruption, said: “It’s hugely welcome that the King’s Speech has prioritised the primary legislation needed to deliver AML supervisory reform. Strengthening our defences against dirty money is vital for safeguarding the UK’s reputation as a trusted place to do business and achieving sustainable growth.
“Despite heavy pushback from the legal sector, these reforms recognise that lawyers need to be regulated on a level playing field. But to be successful, these reforms must ensure the FCA is given the necessary powers, resourcing and specialist legal expertise to step up as an effective AML supervisor of the legal and accountancy sectors.
“With the UK soon facing a review by the Financial Action Task Force, there is no time to lose and the government now needs to push ahead at pace with the promised reforms.”
Speaking yesterday at the FCA financial crime conference, chief executive Nikhil Rathi said the ways financial crime has been traditionally tackled were in many cases no longer “fit for the environment we are now operating in”.
“Historically, we’ve organised our responses around institutional boundaries. Each firm or authority focused on its own remit and responsibilities. That may have made sense when threats were slower and easier to contain.
“But criminals today don’t see our org charts. They see seams. Gaps to exploit in the hand-off between one system and another. In the place where information isn’t shared, or responsibility is a grey area.
“Against this kind of networked threat, we will always be outgunned if we act alone. So we need to update our thinking – fast.”
Mr Rathi identified three key changes the FCA was making to adapt to the changing nature of the threat.
First, was greater openness: “Earlier, more effective and responsible sharing of information, insight and signals.”
Second was to embrace technology. “Criminals are adopting new technology at pace, and we have to keep up. At the FCA we’re investing heavily in data, technology, surveillance and detection tools.”
The final “and perhaps most important” shift was “deeper joint working”.
Mr Rathi explained: “With the National Crime Agency, we’ve published nine economic crime priorities, focusing our effort where the threat is greatest: money laundering, fraud, jurisdictions of risk. The list goes on…
“The new AML regime also creates real opportunities to deepen our work with professional body supervisors in the legal and accountancy sectors.”