The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has raised concerns over the effectiveness of anti-money laundering (AML) supervision in the legal and accountancy sectors. In its annual report, the body highlighted a lack of consistent improvement and called for stronger efforts to combat money laundering in the UK.

AML Body Calls for Improved AML Supervision

OPBAS, a division of the Financial Conduct Authority (FCA), is responsible for overseeing the AML activities of nine legal and 13 accountancy professional body supervisors (PBSs). These bodies include entities such as law societies, bar councils, and the Solicitors Regulation Authority (SRA), along with several others that supervise lawyers in the UK.

Despite the ongoing efforts of these PBSs, OPBAS stated in its latest report that it is not witnessing “the consistent, effective improvement we need” in the fight against money laundering. The body stressed the need for “a combined commitment” from legal and accountancy regulators to effectively fulfil their AML supervisory responsibilities, safeguarding the UK from illicit financial activity.

The report urged these regulators to strengthen their AML supervision, calling for more proactive interventions. OPBAS explained that the aim is for the regulators to reduce the risk of illicit funds entering the UK through robust and targeted oversight of their supervised populations.

Speaking about the latest findings, Verify 365 CEO Rudi Kesic said “This report is extremely concerning in regards to AML regulations and combating financial crime in the UK. The legal sector is not proactively regulated when it comes to AML compliance, particularly due to the lack of widespread adoption of available AML technology. The regulators are not directing law firms to use advanced tools that could significantly improve their ability to prevent financial crime, leaving a gap in the industry’s defence against money laundering”

Legal Sector Under Scrutiny

The legal sector, in particular, came under fire in the OPBAS report. The organisation found that the AML supervision in this sector fell short compared to the accountancy sector. It criticised legal PBSs for lacking clear criteria for inspections and for failing to implement formalised supervisory cycles. Additionally, one PBS was found not to have classified any of its supervised population as high-risk, despite some members offering services that are generally considered high-risk, such as trust and corporate services.

OPBAS also highlighted concerns over AML training in the legal sector. The report revealed that some PBSs, despite overseeing professionals with high-risk activities, did not provide regular AML training for staff in specialist roles.

Another concerning trend noted in the report was a decrease in the number of suspicious activity reports (SARs) submitted by the legal sector to the National Crime Agency (NCA). OPBAS found that legal regulators were not using their enforcement powers “in an appropriate and dissuasive way,” raising questions about the effectiveness of their supervision.

Accountancy Sector Outperforms, But Gaps Remain

While the accountancy sector’s AML supervision was found to be more effective than that of the legal sector, OPBAS noted that significant gaps remained across both sectors. In particular, some PBSs were found to be under-resourced, with inadequate staffing and expenditure dedicated to AML supervision.

A “deep dive” conducted by OPBAS into the three PBSs responsible for barristers and advocates identified weaknesses in key areas. These PBSs, according to the report, were not prioritising AML supervision to the same degree as other regulatory obligations. OPBAS also noted that these bodies generally considered the risk of money laundering and terrorist financing in the barrister and advocate population to be low. While OPBAS agreed that the relative risk in this sector is lower than others, it cautioned that some level of risk remains and must be addressed.

A Focus on the Conveyancing Sector

The report also took a close look at the conveyancing sector, which is known to be a high-risk area for money laundering. OPBAS highlighted concerns over the verification of the source of funds, third-party involvement, and inappropriate use of client accounts, particularly in high-end property transactions. These issues, according to the report, could detract from attention being paid to risks in lower-value property transactions.

Rudi Kesic added “Conveyancing firms are under increasing pressure to meet the UK Money Laundering Regulations, particularly regarding source of funds checks, but many still rely on outdated manual processes that expose them to significant compliance risks. Given the high-risk nature of property transactions, it’s crucial for firms to adopt advanced, tech-driven solutions like Verify 365. By automating and streamlining source of funds verification, firms can not only ensure compliance but also improve efficiency, reduce human error, and provide a more seamless client experience. In today’s legal landscape, technology like Verify 365 is a necessity to protect against financial crime and regulatory scrutiny.”

Regulatory Response and Industry Criticism

Andrea Bowe, director of specialists at the FCA, acknowledged the ongoing challenges in improving AML supervision. She said, “The FCA is committed to playing a leading role in reducing and preventing financial crime. Through OPBAS, we have intervened to tackle failings where we have found them. However, we are still not seeing the consistent, effective improvement we need.”

Bowe reiterated that tackling financial crime remains a key priority for the FCA, with OPBAS continuing to focus on enhancing the consistency and effectiveness of PBSs in their AML roles.

Dr Susan Hawley, executive director of Spotlight on Corruption, also weighed in on the findings, criticising the current approach to AML supervision in the legal and accountancy sectors. She said, “The report shows clearly that leaving the policing of money laundering rules to professional bodies for lawyers and accountants isn’t working and that things are getting worse.”

Hawley called for a more ambitious approach from HM Treasury, urging it to consider fundamental reforms to AML supervision. She argued that failing PBSs should have their supervisory responsibilities removed as soon as possible, as the status quo is no longer sustainable.

Future of AML Supervision

Under the previous government, HM Treasury was consulting on the future of AML supervision. One option on the table is consolidating supervision in the legal sector under a single regulator. The SRA has already expressed interest in taking on this role.

As the UK continues its efforts to tackle financial crime, the OPBAS report highlights that more work is needed to ensure effective supervision across both the legal and accountancy sectors. Stronger enforcement, clearer supervisory frameworks, and better use of resources are critical if the UK is to meet its AML obligations and protect itself from the threat of illicit financial activities.

Verify 365’s CEO Rudi Kesic would like to see more done, particularly about raising awareness and educating “I have spoken passionately about the need for AML regulation bodies to be doing more to raise awareness by working together with industry leaders within the legal technology space. Education and awareness are the keys to getting businesses operating within the legal, property and financial sectors to understand the importance of meeting their AML obligations and how they can achieve this with effective legal technology.”

“It should be a united effort between the regulation bodies who need to do more to level up standards and legal technology leaders who have viable solutions to help and elevate that progress and ultimately combat money laundering and financial crime.”