London, October 13, 2023 – The Law Society has voiced apprehensions about the potential compromise of anti-money laundering (AML) supervision due to government reform proposals. In a recent statement, they underscored the critical need to retain legal sector-specific expertise to ensure the effectiveness of AML measures.
Commitment to Combat Illicit Finance
Nick Emmerson, President of the Law Society, reaffirmed the legal profession’s commitment to combating illicit finance and money laundering. However, he expressed concerns that the proposed reforms might lead to a loss of crucial expertise in the AML regime.
Treasury’s Proposed Solutions
The Treasury’s consultation paper, which closed on June 30, presented several options to address what they deemed “significant weaknesses” in AML supervision:
Enhanced OPBAS: One option involves bolstering the powers of the Office of Professional Body Anti-money Laundering Supervision (OPBAS+).
Consolidation: Another option entails consolidating regulatory bodies into a single accountancy sector supervisor and one legal sector supervisor, with the potential for either a UK-wide remit or jurisdiction-specific supervisors.
Single Supervisory Body: A third proposal suggests establishing a single entity responsible for supervising all legal and accountancy sector firms, extending its oversight to other sectors currently managed by HMRC.
Unified Public Body: The final option involves creating a single public entity to oversee all AML and terrorism finance activities in the UK, including the financial services sector.
Law Society’s Preferred Approach
The Law Society has thrown its support behind the second option, advocating for consolidation, but specifically for England and Wales. They argue that this approach could simplify the regulatory landscape while preserving the independence of the legal profession. Notably, the Legal Services Board has expressed interest in taking on this role.
Enhancing OPBAS’s Powers
Emmerson expressed reservations about the effectiveness of enhancing OPBAS’s powers, suggesting that it might not adequately address the existing issues in the supervisory regime. He stressed the need for a more comprehensive focus on the regime’s overall effectiveness and outcomes, rather than mere compliance.
Regarding sanctions, Emmerson pointed out that there is no evidence of sanctions compliance failures within the legal profession. Consequently, he argued against increasing the role of AML/CTF supervisors in monitoring sanctions controls and finances. Instead, he advised law firms to assess their own sanctions risk, which he suggested could be quite limited.
Challenges of Money Laundering Regulations (MLRs)
In conclusion, Emmerson emphasised that while reforming the supervisory regime is crucial, it alone may not suffice. He drew attention to the challenges posed by money laundering regulations (MLRs), particularly their relevance to the financial sector. He anticipates that the forthcoming consultation on MLRs will provide an opportunity to address some of these challenges.
As discussions around AML supervision reform continue, the legal sector’s concerns underscore the importance of striking a balance between streamlining regulations and maintaining sector-specific expertise to combat financial crime effectively.