Too much of a bad thing


Please may I distract you from the festering plague sore that is Brexit by drawing your attention instead to something we Brits do rather well, which is AML supervision.  In fact we’re so good at this that we have dozens – literally dozens – of agencies involved in it.  To quote from the December 2018 FATF mutual evaluation of the UK (you can imagine the evaluators groaning as they realise just how many meetings they are going to have to hold): “The Financial Conduct Authority supervises the majority of financial institutions.  HM Revenue and Customs supervises some financial institutions (money service businesses which are not supervised by FCA) and… High Value Dealers, estate agents, and accountants and TCSPs not supervised by professional body supervisors or the FCA.  The Gambling Commission supervises casinos.  There are 22 legal and accounting sector self-regulatory body supervisors.”  That’s a total of 25 AML supervisory bodies.  For one jurisdiction.  So it can be a bit disjointed.  Indeed, in their recent report “No Rest for the Wicked: Driving Change in the UK’s Post-FATF Evaluation AML Regime”, think-tank RUSI described the supervisory regime as “complex and fractured” (neither adjective instils much confidence).

For years there have been calls to rationalise things – and do bear in mind that many jurisdictions can manage with one single, solitary AML supervisory body.  Granted, the UK is a large and varied financial jurisdiction so one-size-fits-all may be too ambitious, but we could pare it down to, for instance, the FCA, the GC, one for accountants, one for lawyers, and HMRC for the estate agents and HVDs.  And in January 2018 the government did make a change… by introducing a supervisor to supervise the self-regulatory AML supervisors.  This is OPBAS – the Office for Professional Body Anti-Money Laundering Supervision – and with admirable restraint RUSI calls it “an extra layer of complexity”.

OPBAS has been up and running for a year now and has just published the results of the AML supervisory assessments it undertook in 2018.  I’ll be honest: it’s not an encouraging picture.  The point of OPBAS is to “ensure the [22] professional body AML supervisors provide consistently high standards of AML supervision”.  And by their own admission, in this recent report, there is plenty to do.  Of the 22 bodies in their purview:

  • 80% lack appropriate governance arrangements
  • 91% are not fully applying a risk-based approach to their AML supervisory activities
  • 23% undertake no form of AML supervision [what?!]
  • 80% lack appropriate staff competence and training
  • 36% lack sufficient record keeping policies and procedures, meaning they do not always record their rationale for decisions
  • 48% lack formal internal audit or quality assurance procedures.

If we needed another reason – beyond a general outbreak of sanity – for stripping some of these bodies of their AML supervisory role, here we have it: they’re rubbish at it.  And I had so hoped that this was going to be a good news story.