Anti-money laundering supervision could be compromised by lack of legal expertise under government reform plans, the Law Society said today.
Chancery Lane was responding to the Treasury’s consultation on Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF), warning that the government must ensure legal sector-specific expertise is retained.
’The solicitors’ profession is fully committed to tackling illicit finance and money laundering. This is demonstrated by the significant resources allocated to complying with its AML and financial crime obligations,’ said Society president Nick Emmerson. ’The AML regime is highly complex and it is vital for representative bodies, such as the Society, to be able to help draft and contribute to legal sector-wide guidance.
’We are concerned that in the current proposals, legal sector-specific expertise could be lost, meaning the AML supervisory regime would be less, rather than more, effective in the short- to medium-term.’
The Treasury consultation, which closed on 30 June, proposed four options for tackling what it calls ‘significant weaknesses’. They are:
- Retaining the existing regime but with enhanced powers for the Office of Professional Body Anti-money laundering Supervision (OPBAS+).
- Consolidation of regulators into one accountancy sector supervisor and one legal sector supervisor. The legal sector supervisor could have a UK-wide remit, or one legal supervisor could be set up for each UK jurisdiction.
- A single body to supervise all legal and accountancy sector firms. It could also supervise some or all of the wider sectors currently supervised by HMRC.
- A single public body to undertake all AML and terrorism finance supervision in the UK, including in the financial services sector.
The Law Society backs the second option, but only for England and Wales. ’PBS consolidation has the potential of simplifying the complex regulatory landscape, making it easier to navigate and bringing more consistent levels of supervision. The model also supports the preservation of the independence of the legal profession from the government,’ said Emmerson. In its own response to the consultation, the Legal Services Board has said it would be keen to take on this role.
On OPBAS+, Emmerson said: ’Giving OPBAS additional powers is unlikely to address the ongoing failings of the current supervisory regime, particularly around fragmentation and lack of consistency. There must be a greater focus on the overall effectiveness of the regime and outcomes, rather than tick-box compliance.’
On sanctions, Emmerson said the Society is ’not aware of any evidence from either law enforcement or the Office of Financial Sanctions Implementation of any failings across the legal profession in sanctions compliance. As such, there is no justification to increase the role of AML/CTF supervisors in monitoring firms’ sanctions controls and finance.
He added: ’Law firms should consider their own risk appetite and how to address their sanctions risk, which could be extremely limited.’
Emmerson concluded: ’Reforming the supervisory regime will play an important role in achieving an effective AML regime, but it will only go so far without addressing the wider regulations which underpin the regime. A significant proportion of the money-laundering regulations (MLRs) are relevant to the financial sector. Consequently, the MLRs are onerous and difficult to put into practice across the legal profession. The upcoming consultation on MLRs will provide an opportunity to address some of the challenges with the MLR obligations.’
