MPs call for better anti money laundering supervision

The Treasury select committee is calling for the government to do more to tackle economic crime, saying the anti money laundering (AML) regime should be strengthened, with proposals including introducing corporate liability legislation, reforms to Companies House, and removing HMRC’s responsibility for AML supervision

The committee’s report on its inquiry into AML supervision and sanctions implementation found that the scale of economic crime in the UK is very uncertain, with estimates ranging from the tens of billions of pounds to the hundreds of billions. It recommends the government should provide a more precise estimate so that the response can be tailored to the problem.

It also wants a more frequent system of public review of the UK’s AML supervision and law enforcement to ensure a constant stimulus to improvement and reform.

The report says the AML supervision system is highly fragmented. The UK has 22 accountancy and legal professional body AML supervisors, regulated by the Office for Professional Body AML Supervision (OPBAS) and three statutory AML supervisors (HMRC, the Financial Conduct Authority and the Gambling Commission).

The committee says it is unclear why OPBAS only supervises the professional body AML supervisors and not the statutory ones. To ensure consistency across all AML supervisors, the government should create a supervisor of supervisors, and there is a strong case for this to be OPBAS.

The inquiry heard evidence from Jon Thompson, HMRC CEO, in which he said he was querying whether HMRC should retain its role in AML supervision, as part of the current spending review. The committee said there was an argument in favour of this, as it would allow HMRC to concentrate on core tasks and would also address concerns about whether HMRC’s approach to its supervisory responsibilities may be unduly influenced by its role as a tax authority.

The report also highlighted concerns about HMRC’s ability to regulate non registered firms and in particular estate agents, saying there should be a stronger focus on this, as property transactions have been identified as a ‘weak link’ in the AML regime.

It was also suggested that more emphasis should be placed on solicitors as they will often assess the source of a customer’s funds.

Another area of concern is company formation, specifically the role of Companies House, which is not required to carry out any AML checks. The committee says this makes it a weakness in the UK’s system for preventing economic crime, and recommends the government urgently consider giving it the powers to ensure that it plays no role in helping those undertaking economic crime.

The report was heavily critical of the UK’s corporate criminal liability framework for economic crime, saying it was ‘wrong and potentially dangerous’ to not reform this area.

The committee wants the government to consider proposals for new legislation, including a proposal that a company would be guilty of the substantive criminal offence if a person associated with it commits a certain offence, and the introduction of a new offence of failing to prevent economic crime.

On the issue of sanctions, these are the responsibility of the Treasury’s office for financial sanctions implementation (OFSI), which the committee said ‘has been questioned for lacking bite’. It wants the government to review the effectiveness of OFSI this year, two years after its formation.

Other recommendations include creating a centralised database of politically exposed persons (PEPs) for the use of those registered by AML supervisors, and encouraging greater use of suspicious activity reports (SARs).

Nicky Morgan, chair of the Treasury committee, said: ‘When the UK does leave the EU, there will be both risks and opportunities in terms of economic crime. The government must ensure it does not bow to buccaneering deregulatory pressures and maintain its intentions to lead in the fight against economic crime.

‘Leading that fight is going to require focus. The government needs to bring greater order to a fragmented supervisory system, better identify the scale of the problem, and make a greater effort to combat the known risks and gaps in the supervisory system.’

Economic Crime - Anti-money laundering supervision and sanctions implementations is here.

Report by Pat Sweet

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