UK Anti-Money Laundering Standards "Not Working" in Legal and Accounting Sectors, Says Charity

A prominent UK charity, Spotlight on Corruption, has criticized the system allowing professional bodies for lawyers and accountants to set their own anti-money laundering (AML) standards, describing it as a failure. The charity called for failing organizations to be stripped of their AML oversight powers, following a critical report from the Financial Conduct Authority (FCA).

Dr. Susan Hawley, Executive Director of Spotlight on Corruption, stated: “The [UK] Treasury urgently needs to look at fundamental reform of AML supervision, because the status quo is no longer tenable. Failing supervisors should have their policing role removed from them as early as possible.”

The FCA report, which prompted the charity's response, revealed that none of the legal and accounting professional bodies overseen by the regulator were found to “fully” meet AML standards. These organizations, including Law Societies and other professional groups, are responsible for setting AML standards for their members and carrying out investigations in cases of non-compliance. They are also tasked with enforcing sanctions and handing out fines when breaches occur.

However, the FCA noted there had been “no material improvement” in the effectiveness of these groups over the past year. Spotlight on Corruption underscored this finding, arguing that many of the organizations should no longer be responsible for setting AML standards within their sectors. The charity highlighted the fact that “the majority” of the nine professional bodies examined in-depth by the FCA had “declined or remained static” in terms of their overall effectiveness in combatting money laundering.

Spotlight also criticized the FCA for not naming the bodies it examined, stating, “Without ‘naming and shaming’ these failing supervisors, they cannot effectively be held to account for their shoddy performance.” The charity further pointed out that enforcement was a “real Achilles’ heel” for all the bodies in question, noting a decline in both the number and value of fines issued in 2022/23, despite increasing rates of non-compliance.

The report also raised concerns about the allocation of resources by professional bodies to their AML supervisory functions, with the FCA identifying serious issues in this area. “Almost a third outsourced their inspections in a way that opened up new weaknesses,” Spotlight noted, quoting the FCA’s findings.

While the FCA called for legal and accounting bodies to “do much more to improve their current approach” to AML supervision, it did not outline specific actions that it would take against individual organizations. Instead, the regulator stated that it would focus on efforts to “strengthen the current AML supervisory regime.”

The criticism from Spotlight on Corruption adds pressure on the UK government and regulatory authorities to overhaul the existing system of self-regulation in the legal and accounting sectors, amid growing concerns over money laundering and financial crime.

By fLEXI tEAM