Change Ahead in UK AML Supervision

HM Treasury has published a consultation on reform of the supervision of the UK's anti-money laundering ("AML") and counter-terrorism financing ("CTF") regime. Interested parties have until 30 September 2023 to submit their responses.

The consultation comes on the back of the 2022 Review of the UK’s AML/ CTF regulatory and supervisory regime. Whilst acknowledging improvements in the regime the Review concluded that there were a number of structural weaknesses. Four possible models for a future AML / CTF supervisory system are proposed to reform the current structure under which the Financial Conduct Authority, HMRC and the Gambling Commission, together with 22 Professional Body Supervisors ("PBSs"), oversee AML / CTF compliance in the UK.

The models are: 

1. OPBAS +, where the existing Office for Professional Body Anti-Money Laundering Supervision ("OPBAS") is given enhanced powers to supervise PBSs, with additional accountability mechanisms;

2. PBS Consolidation, where the 22 PBSs are consolidated into either 2 or 6, split between the legal and accounting sectors either across the whole of the UK or in each constituent country. Supervision of accountancy firms presently supervised by HMRC may be transferred to one of the PBSs;

3. Single Professional Services Supervisor ("SPSS"), where a single body would supervise all legal and accountancy sector firms for AML / CTF, including some bodies in other sectors currently supervised by HMRC;

4. Single Anti-Money Laundering Supervisions ("SAS"), where all AML/CTF supervision in the UK is undertaken by a single public body.

At first blush, these models largely focus on amending supervision of professional bodies, with minimal impact on the wider regulated sector. However, the proposed SAS model would undoubtedly have a major impact on all sectors. Many of our clients, including those operating in high and low risk AML / CTF environments, would do well to consider how such a change would alter their present compliance strategies and enforcement risk.

There is no doubt that an SAS model could bring about a welcome consistency of supervision and enforcement, as well as a better information sharing across all sectors. Conversely, there is a real risk that the present nuance of treatment for individual sectors, particularly those that are at low risk, could be lost.