Accountancy bodies slated over anti-money laundering controls

The accountancy sector has come under fire for its approach to anti-money laundering (AML) supervision, with claims many professional body supervisors (PBSs) are failing to supervise standards robustly, partly for fear of upsetting members and because they believe money laundering is not an issue for firms

The new watchdog, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), which has oversight of the 22 anti-money laundering (AML) supervisors in accountancy and law, has published its first review and says the results show ‘a very variable picture’.

In a speech covering OPBAS’s role, Alison Barker, director of specialist supervision, said the report highlighted two key issues.

‘First, the accountancy sector and many smaller professional bodies focus more on representing their members rather than robustly supervising standards.

‘Partly because they don’t believe – or don’t want to believe – that there is any money laundering in their sector.

‘Partly because they believe that their memberships will walk if they come under scrutiny.

‘And second, this belief that that there isn't any money laundering in their sector means intelligence isn't being shared enough.’

Overall, OPBAS’s report found 80% of PBSs lacked appropriate governance arrangements, with just under half lacking clear accountability and oversight for AML supervision at a senior level. They also had underdeveloped, or neglected, procedures for reporting and escalating potential AML issues. Responsibilities for AML supervision were not always sufficiently independent of the functions that promote membership and advocate for members’ interests.

Nearly a quarter (23%) had no form of supervision, while 18% had not even identified who they needed to supervise

Nearly a quarter (23%) had no form of supervision, while 18% had not even identified who they needed to supervise. Over 90% had not fully developed a risk based approach and had not collected all the data they needed to form a view about their riskiest members and their services.

Barker said: ‘We found that for many supervision wasn’t important. It was only an add-on. This means it often wasn’t on the agenda and for around half, there was insufficient senior management focus.

‘For 20%, it wasn’t overseen by the governing bodies. In some of the professional bodies, where supervision had been outsourced to another provider, there was minimal oversight of the work being done.’

The review said 23% of accountancy PBSs outsourced AML compliance assessments of their members to another PBS or an external third party.

PBSs have a range of enforcement tools they could use, but OPBAS found that 86% of relevant PBSs preferred to offer support and guidance to members to improve their AML compliance over an extended period rather than issue penalties. Most (92%) of accountancy PBSs expressed concerns about taking robust action if this would damage their ability to attract or retain members.

Barker said: ‘There has not been enough enforcement action. Last year, only 50% of professional bodies issued fines for AML failings. It was even less the year before (27%).

‘This is hard to believe, given the high-risk activities of lawyers and accountants. We were told, particularly in the accountancy sector, that professional bodies believed their members would leave if they took robust enforcement action.

‘There’s a problem with this belief. Without enforcement how can a professional body show it “means business”? How can a professional body show its members that meeting standards is a serious requirement? How can clients and consumers be confident in the credibility and integrity of their professional advisers?’

Barker was also critical of the failure of many PBSs to share information as a way of cracking down on covert activity. As at February 2018, only 40% of PBSs were members of the main intelligence sharing networks, and while this has now risen to 48%, Barker said it should be 100%.

‘We have seen some good examples of intelligence sharing arrangements in the larger legal sector supervisors.

‘However, some professional bodies have no resources allocated to intelligence sharing. Some have no clear responsibilities or systematic approach to sharing or using intelligence to inform decisions or supervisory and enforcement work. There was evidence that suspicious activity reports or SARs had not been raised when they should have been,’ Barker said.

OBPAS was also critical of the processes professional bodies have for handling whistleblowing, with 56% having no whistleblowing policy in place at the time of its assessments, despite whistleblowing being an important source of intelligence.

OPBAS is now calling on all PBSs to undertake risk-based supervision of the professions i.e. focused on the riskiest types of business or clients like tax, conveyancing, company formation.  The watchdog says this must be properly resourced, with leadership from the top, and robust enforcement outcomes, along with a positive uptake in intelligence sharing.

Barker said: ‘It is a step forward that all professional body supervisors have strategies and action plans in place. If delivered they will make a big difference to the tackling of money laundering in the UK. We will be monitoring these.

‘We will be looking to see that these are being executed and happening quickly. And we want to see an improved quantity and quality of supervision, enforcement and intelligence sharing outcomes.’

OPBAS report on anti-money laundering supervision assessments

Alison Barker speech on OPBAS’s role

Report by Pat Sweet

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