Money laundering:
Greater consistency needed to stop it
The “multiplicity” of legal and accountancy regulators in the UK is not helping the fight against money laundering, the Financial Action Task Force (FATF) has complained.
The FATF, an inter-governmental body created to fight money laundering and terrorist financing, said that although larger law and accountancy firms understood the risk of money laundering and “had the resources to mitigate them, the understanding is uneven in these sectors”.
The FATF said the “multiplicity” of regulators, which it refers to as ‘supervisors’, did not “aid a consistent approach”, although the UK had created the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) to deal with this.
The task force called on the UK to “continue its efforts to address the significant weaknesses in supervision by the 22 legal and accountancy sector supervisors”.
This should be achieved by ensuring consistency in understanding of the risk of money laundering and terrorist financing, taking a risk-based approach to supervision, and ensuring that “effective and dissuasive sanctions” were applied.
In a report on the UK’s anti-money laundering (AML) and counter terrorist financing systems (CFT) published this month, the FATF said that while the UK “aggressively pursues” these issues and law enforcement agencies had “powerful tools” to deal with them, the country’s suspicious activity report (SAR) regime needed to be “modernised and reformed”.
The task force went on: “While a significant number of high-quality SARs are received, the SAR regime needs a significant overhaul which would improve the financial intelligence available to the competent authorities.
“While the full range of financial institutions and designated non-financial businesses and professions are required to report SARs, there remains an under-reporting of suspicious transactions by higher risk sectors such as trust and company service providers, lawyers, and accountants.”
The FATF said “a number” of fines had been levied on members of the legal and accountancy sectors, but they had not exceeded £85,000 for money laundering and £15,000 for terrorist financing.
“One reason for establishing OPBAS was to address the application of proportionate and dissuasive sanctions to these sectors.”
The FATF said that since the Money Laundering Regulations 2017 came into force last summer, legal and accountancy regulators could refer cases to the Financial Conduct Authority and HM Revenue & Customs for sanctioning, “where unlimited sanctions can be applied”.
The FATF said HMRC was “currently in discussions with the legal and accountancy supervisors” to put in place a memorandum of understanding (MoU) for such referrals.
“Some supervisors see the MoU as being a key element to have in place before any referrals can be made.”
A spokesman for the Solicitors Regulation Authority (SRA) said the regulator regularly shared information with the FCA and HMRC and MoUs with these organisations had been in place for six years.
The Solicitors Disciplinary Tribunal does not impose fines where solicitors are struck off for money laundering, though it does impose costs orders. Two solicitors have been struck off for money laundering this year. Fines have been imposed where solicitors have been suspended.
In apparent support of the SRA’s call for greater fining powers without the need to refer solicitors to the tribunal where the potential fine could exceed £2,000, the FATF commented: “The main legal sector supervisor also mentioned the need for greater independence in applying sanctions in lawyer-owned law firms.
“Currently, unlimited fines can only be imposed on lawyer-owned firms if the case is referred to the Solicitors Disciplinary Tribunal.”
Speaking at yesterday’s SRA compliance officer conference in Birmingham, chief executive Paul Philip described the report as giving the UK “six and a half out of 10” in its work to combat money laundering.
