The entity responsible for overseeing anti-money laundering (AML) activities in the legal sector has issued a stark warning, highlighting concerns over lax supervision. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) declared that there is a pressing need for substantial improvement among legal regulators.
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has called for stronger efforts from legal regulators to enhance their AML oversight. The body emphasised the necessity for a collaborative commitment to effectively combat the threat of money laundering in the UK. OPBAS is part of the Financial Conduct Authority (FCA) and supervises the anti-money laundering activities of nine legal and thirteen accountancy supervisors in the UK.
Despite efforts, OPBAS’s fifth annual report reveals persistent shortcomings, as none of the professional body supervisors (PBSs) fully met its expectations. Notably, two received “supervisory directions” due to their deficiencies. The report highlights a lack of uniform effectiveness in supervision, risk management, enforcement, and information sharing.
The report also differentiated the performance between accountancy and legal sectors, noting that while accountancy PBSs displayed relatively better supervision, significant gaps persist across both sectors. The legal sector exhibited unclear criteria for inspections and lacked formal supervisory cycles. Surprisingly, some PBSs failed to classify any members of their supervised populations as high risk, despite handling high-risk trust and corporate services.
OPBAS identified occurrences where legal sector PBSs considered money laundering risks to be low, leading to inadequate AML training for staff in specialised roles. A decrease in suspicious activity reports submitted to the National Crime Agency was noted, and legal sector PBSs were criticised for not utilising their enforcement powers effectively.
OPBAS conducted detailed examinations (‘deep dives’) into various sectors, uncovering weaknesses among PBSs responsible for barristers and advocates. These PBSs reportedly prioritised AML supervision below other regulatory duties, with insufficient resources and spending devoted to AML tasks. Moreover, OPBAS agreed that while the risk of money laundering for barristers and advocates might be relatively low, there is still an inherent risk that must not be ignored.
Concerns were also raised about the lack of independent risk analysis by PBSs and confusion among those regulated about the scope of AML rules. Regarding conveyancing, which poses a high risk for money laundering, OPBAS found a consensus on key risk factors, such as verifying unexplained sources of funds and wealth, identifying third parties, and improper use of client accounts.
Andrea Bowe, FCA specialisation director, reinforced the priority of tackling financial crime, stressing the need for consistent and effective improvements from PBSs. Dr. Susan Hawley, executive director of Spotlight on Corruption, argued that the current system of relying on professional bodies is failing, advocating for a comprehensive reform of AML supervision.
The Treasury, under prior government guidance, had been examining options for the future of AML supervision, including potentially consolidating legal sector supervision under a single regulator. The Solicitors Regulation Authority has proposed itself as a candidate for this role.
The call for action from OPBAS underscores the critical need for improvement in AML supervision. The debate continues on whether reform can be achieved through existing structures or if a more radical overhaul is necessary.
