The Financial Conduct Authority (FCA) has announced that it is to be given further responsibility by the Treasury for reviewing the anti-money laundering (AML) supervision carried out by professional bodies, which will be known as the Office for Professional Body AML Supervision (OPBAS).
11/05/2017
The Financial Conduct Authority (FCA) has announced that it is to be given further responsibility by the Treasury for reviewing the anti-money laundering (AML) supervision carried out by professional bodies, which will be known as the Office for Professional Body AML Supervision (OPBAS).
Amidst fears that the government will soon seek to ‘gold plate’ the Fourth Money Laundering Directive (4MLD) into UK law — should professional service firms be afraid of more bite?
Supervising the supervisors
While the FCA already holds significant investigative and enforcement powers in respect of AML and counter terrorist financing (CTF) — displayed in respect of a probe into HSBC in February this year — OPBAS’s function is set at a slightly different angle. Funded via a new fee to be levied on professional body supervisors — such as the Solicitors Regulatory Authority and the Institute of Chartered Accountants — OPBAS is set to be the ‘supervisor of supervisors’ in respect of AML.
While the full logistics of the arrangement are yet to be confirmed, OPBAS will seek to remove inconsistencies and loopholes exploited by money launderers across the various AML regimes in force. The Treasury has proposed that OPBAS will have powers to fine the supervisors should AML regulations, including 4MLD, be breached.
Fourth Money Laundering Directive
The move comes as the FCA prepares to assist the Treasury in transposing the Fourth Money Laundering Directive (4MLD) into UK law. Following an initial eight-week consultation launched in September 2016, which outlined how the government intended to implement the directive, a further consultation was published on 15 March 2017 seeking views on the draft regulations. The requirements of the directive must come into effect by 26 June 2017 – regardless of Brexit and the forthcoming general election.
The emphasis of 4MLD is on risk assessments by Member States to:
… the money laundering and terrorist financing risks affecting it, in conjunction with associated data protection concerns.
Member States are required to designate an authority to co-ordinate the national response to the risks identified.
OPBAS is likely to be instrumental in filling this role in the UK, ensuring information is made available to firms to assist with their own money laundering and terrorist financing risk- assessments. This is particularly so given the Treasury’s apparent intentions for OPBAS to set the standard for the supervisors to comply with the obligations of 4MLD.
Impact on professional service firms and their insurers
The full scope of OPBAS’s role is yet to be defined. Currently its focus is on the supervisors of professional bodies. In theory, therefore, firms should not come into direct contact with OPBAS.
Nonetheless, the relevant supervisory entities will no doubt be reviewing their own procedures in respect of checks, investigation and enforcement of AML rules over their firms. As a result, firms and their insurers can expect to see an increase in probes and/or enforcement action taken by their regulators.
The government’s policy decisions that emerged from the earlier consultation process has raised fears that it will seek to ‘gold plate’ 4MLD and place a needless burden on professional service firms, particularly sole practitioners and small firms. The final policy decisions (as implemented through domestic legislation) are awaited with interest.
Investigation and/or enforcement action taken by a regulator is likely to be costly, time-consuming, and almost certainly negative for a firm’s public image. In order to avoid scrutiny, firms should continue be proactive in their approach to risk assessments and compliance with AML and CTF Guidelines.
Underwriters should be mindful of a history of regulator intervention. In respect of AML and CTF regimes, in particular, they should consider enquiring into the policies and procedures in place, when considering whether to write the risk.
Read other items in Professions and Financial Lines Brief - May 2017
