AML: Reform looming
The Solicitors Regulation Authority (SRA) is facing “challenges” in retaining staff in its anti-money laundering (AML) team, in part because it cannot compete with private sector salaries.
Chief executive Paul Philip said another problem was uncertainty caused by the government’s review of AML supervision in the legal and accountancy professions, which had been delayed by the change of prime minister.
HM Treasury’s review, published in the summer, said the government was “clear” that reform to AML supervision was needed, “but the best scale and type of reform to improve effectiveness and solve the problems that have been identified is not yet clear”.
Currently, the Office for Professional Body Anti Money Laundering Supervision (OPBAS) oversees nine legal and 13 accountancy AML supervisors – the law societies and bar councils of the three UK jurisdictions (including also the SRA and Bar Standards Board), the Chartered Institute of Legal Executives/CILEx Regulation, the Council for Licensed Conveyancers, and the Faculty Office of the Archbishop of Canterbury, which supervises notaries.
In his recently released report to last month’s SRA board meeting, Mr Philip noted the four options listed by the Treasury that it intended to consult on:
- Minimal changes to the current system, but greater powers for OPBAS, including to levy fines;
- Consolidating professional body supervision, meaning that there would be a single legal sector supervisor either for the UK or for each of England and Wales, Scotland and Northern Ireland. The same model would be put in place for accountants;
- Removing professional body supervision, meaning that all lawyers and accountants would be supervised by a new organisation; and
- Moving all current AML supervision to a new body, bringing lawyers and accountants together with financial services, gambling, estate agency and all other regulated sectors to be supervised by the new body.
Mr Philip wrote: “We had anticipated that the consultation would be published immediately, but because of political changes this is likely to be delayed for some time.
“In the meantime, the uncertainty around security of jobs, combined with high AML salaries being offered in the private sector, is creating challenges for retaining staff in the AML team.”
We report separately today that the SRA is putting aside up to £550,000 for one-off payments to staff to help them cope with the cost-of-living crisis.
The Treasury review was cool on the idea of reforming OPBAS, saying it would not address “structural concerns that the review has highlighted, for example the potential for inadequate regulatory/representative divides within the PBSs [professional body supervisors] or weaker enforcement powers available to PBSs.
“The difficulty of a large number of supervisors, and resulting inconsistencies across the regime, would also persist.”
The Treasury said any changes, particularly major structural reform, “would take place over a period of years”. Meanwhile, the government would work with supervisors to ensure short-term improvements “are still achieved while longer-term reform is considered”.
In an OPBAS post-implementation report, published with the review, the Treasury said that “despite many improvements” since its launch in 2018, consistency of approach by PBSs was still limited.
Information and intelligence sharing had “significantly improved”, as a result of work done by OPBAS to introduce “sharing forums”.
Despite improvements in effectiveness, the findings of the third OPBAS report demonstrated that “significant weakness” remained in the regime, which “must be addressed”.
Among them were findings that only 54% of PBSs “were effective in demonstrating senior management engagement” and although 86% of PBSs were found to have applied a risk-based approach, only 19% had implemented “an effective risk-based approach”.
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