AML: Legal sector should be treated differently
The Law Society has argued for a single supervisor of anti-money laundering (AML) activity for the legal sector in England and Wales.
While it would seem obvious for the Solicitors Regulation Authority (SRA) to be the body to take the role – given the scale of the other regulators – the Law Society did not specify who the single supervisor should be in its response to HM Treasury’s consultation on the future of AML supervision.
Most of the legal professional bodies and regulators – such as the Bar Council, Bar Standards Board and Council for Licensed Conveyancers – have called for a beefed-up version of Office for Professional Body Anti-Money Laundering Supervision (OPBAS), the option which would the least impact on the current regime.
The Law Society of Scotland also backed this model and stressed its opposition to members becoming subject to a new supervisor south of the border.
Under the current regime, OPBAS oversees nine legal and 13 accountancy AML supervisors, including the law societies and bar councils of the three UK jurisdictions.
HM Treasury set out four options for reform of AML regulation in a consultation this summer, without expressing a preference.
The first was ‘OPBAS+’, with greater powers, including to levy fines, the second consolidated professional body supervision under a single legal sector supervisor.
The third was to create a new organisation, probably a public body, to undertake the task for both lawyers and accountants, while the fourth would expand this body to include financial services, gambling, estate agency and other regulated sectors.
The Law Society argued in its response that it was essential to retain “legal sector-specific expertise” and backed the second option on a devolved basis for England and Wales.
“The legal sector is sufficiently separate to other regulated sectors to be treated differently and it should not be assumed that what works for one will automatically work for the others.”
The OPBAS + model was “unlikely to address some of the ongoing failings of the current supervisory regime, particularly around the issue of fragmentation and lack of consistency”.
The society called for “a greater focus on overall effectiveness of the regime and outcomes, rather than simply tick-box compliance to satisfy overly prescriptive requirements”.
Consolidation of so-called professional body supervisors (PBSs) was “caveated on the Law Society as a representative body retaining a role to influence and contribute world-leading expertise and experience” to legal sector AML compliance.
“The Law Society has been a statutory money laundering supervisor for nearly two decades [responsibilities it delegates to the SRA]. During this time, in the face of a challenging regime we have continued to drive improvements and engagement across the sector.
“Committed to influence and improve the AML supervision regime, we believe it is essential that the Law Society retains such a position in future.”
The society said it was “important to note that whilst consolidation for AML supervision might be effective, consolidation of legal sector regulation more broadly would not be appropriate given the distinct parts of the legal profession and their respective roles and competencies.”
Nick Emmerson, who became Law Society president earlier this month, said PBS consolidation could simplify the complex regulatory landscape, making it easier to navigate and bringing more consistent levels of supervision.
“The model also supports the preservation of the independence of the legal profession from the government.”
“Giving OPBAS additional powers is unlikely to address the ongoing failings of the current supervisory regime, particularly around fragmentation and lack of consistency.”
He added: “Reforming the supervisory regime will play an important role in achieving an effective AML regime, but it will only go so far without addressing the wider regulations which underpin the regime.”
Earlier this month, the Legal Services Board proposed another option, namely that it would take over from OPBAS as the new oversight regulator for AML in legal services.
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