HM Treasury and Britain’s anti-money laundering (AML) watchdog have called for improvements from professional bodies within the legal and financial sector when it comes to their annual reports on compliance failures and supervisory action. The treasury are continuing their push to tackle AML and financial crime having already confirmed previously they are seeking refinement to the AML regulations currently in place.

In a joint letter, HM Treasury and the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) have urged professional body supervisors (PBSs) to sharpen their focus in annual reports concerning AML compliance.

Strengthening Supervisory Reports – HM Treasury & OPBAS Seek AML Reporting Improvements

OPBAS, operating within the Financial Conduct Authority (FCA), oversees 25 PBSs within the legal and accountancy sectors. These include major bodies like the Law Society, the Solicitors Regulation Authority, and the Association of Chartered Certified Accountants. The joint letter emphasised that there is room for improvement in the quality of future reports, aiming for more consistency across all PBSs.

The Treasury and OPBAS’ recommendations stemmed from their review of a third set of annual reports. These reports are guided by the watchdog’s recommendations, which clarify expectations on content and detail required from PBSs.

Need for Enhanced Analysis

As well as emphasising areas of improvement and overall quality of the reports, the letter also highlighted the importance of including more analysis in the reports, particularly concerning the reasons behind compliance failures found in supervised firms. This could provide more insight into the causes of non-compliance and offer a clearer path for improving supervisory approaches.

The Treasury and OPBAS suggested that PBSs conduct further gap analysis to support this goal. Such analysis could pinpoint discrepancies between expected and actual supervisory practices, thereby aiding PBSs in refining their strategies to address these shortcomings.

Focus on Money Laundering

The issue of money laundering has garnered increased attention. In June 2023, HM Treasury published proposals to tighten the national AML regime, potentially enhancing OPBAS’ powers. Additionally, in October, the Legal Services Board applied to become the AML supervisor for the legal profession.

The Treasury and OPBAS encouraged PBSs to provide more detailed information on compliance levels within the firms they oversee. This includes statistics on the types and outcomes of measures taken in response to detected issues.

Improving Suspicious Activity Reporting

A significant aspect of the letter was the call for PBSs to focus more on actions taken in response to inadequacies in suspicious activity reports (SARs). These reports are crucial as they are submitted by law and accountancy firms to the National Crime Agency (NCA) when there is known or suspected money laundering or terrorist financing. Supervisors have the authority to require firms to submit copies of any SAR filed with the NCA.

The letter suggested that by aligning with the watchdog’s expectations, PBSs could further enhance the quality and value of their reports, benefiting both the PBSs and the firms they supervise.

Future Directions

OPBAS plans to provide detailed feedback to each PBS to discuss individual areas for improvement. This initiative aims to prepare PBSs for the next reporting cycle, which covers the year up to April 2024. The subsequent set of PBS reports is due for publication on or before November 1.

HM Treasury and OPBAS expressed their commitment to continued collaboration to support the ongoing enhancement of PBS reports. This partnership underscores their joint effort to bolster the integrity of the AML regime and ensure rigorous supervision within the legal and accounting sectors.

The call for enhanced reporting and supervisory action marks a critical step in the fight against money laundering, with HM Treasury and OPBAS leading the charge to ensure a more robust and transparent framework within the UK’s professional sectors.

The stance demonstrates a determination to tackle AML and compliance issues head on. Leading from the front, HM Treasury are keen on a framework that benefits the legal, financial and accounting sectors.