I’m going to state my position from the outset, so that if you don’t agree you can get your snarls over and done with now, rather than building up a head of steam and perhaps doing yourself a mischief. I don’t think trade bodies should act as AML/CFT supervisory bodies for their members. As you probably know, a couple of months ago the UK chapter of Transparency International put out a report entitled “Don’t Look, Won’t Find”, which looks at the supervision of the AML regime in the UK and takes the view that it is in need of a radical overhaul. Their main beefs are three: that the supervisory bodies currently operating in the UK are not correctly identifying money laundering risks; that these supervisory bodies are not harsh enough in their punishment of AML failings; and (and this is the one I’m thinking about today) that there are serious conflicts of interest. To quote from the TI press release: “The Government has identified that the majority of private sector supervisors actually lobby on behalf of the sectors they’re supposed to regulate, and accept funds from firms they are obliged to investigate.” In my view, this is not good.
Now, I am not criticising those supervisory bodies in and of themselves – that would be biting the hand that feeds, as I frequently take advantage of AML information put out by several of them. But it is surely plain to all that you should not have the same organisation both promoting a profession and policing it. Or, as the TI reports puts it, creating “conflicts of interest between enforcement and promotional responsibilities”. It is like allowing the AA – which seeks to increase the number of motorists in order to create a stronger lobby (and perhaps also to sell more car insurance) – to administer driving tests. Some trade bodies have structured themselves to avoid this conflict – for instance, the Law Society of England and Wales represents and promotes the legal profession, but oversight and enforcement of the standards of that profession (including AML standards) is undertaken by the separate Solicitors Regulation Authority – but by no means all. Indeed, of the twenty-two AML supervisors analysed by the TI report, only seven of them achieve this acceptable degree of separation.
As you know, I am a bear of very little brain when it comes to anything except AML. And I am sure that in other areas of supervision, the intertwining of enforcement and promotion would be of less concern. But in AML, well, we have to be whiter than white, don’t we? How can we preach about high standards of probity and integrity, and about keeping out corruption, if our very system is open to accusations (as in the report) of not doing what it should because it is scared of damaging its membership? If professional individuals and firms in the UK are not doing what they should in the AML arena, they must be named, shamed and punished, regardless of the damage it might do to the profession they represent. The confused set-up we have at the moment calls to mind the warning of Roman poet Juvenal: “Quis custodiet ipsos custodies?” – who will guard the guards themselves?
I hate money laundering 
I feel I could say a lot about this if for no other reason than I spent over a half decade working in a part of a organisation that investigated itself so feel quite aware of the limits and advantages of such an arrangement. To stop me rambling though I am going to go all bullet point:
1) A lot of professions will argue that they must be policed by members of their own profession as a understanding of how said profession works is required. As such Professional bodies acting as regulators makes sense.
2) Such reasoning, while not without validity, I feel does serve to obfuscate and prevent reform of said professions though. IT encourages group think, its bound to be effected by concerns such as potential for public embarrassment that encourage “not looking too hard” or even out and out cover up.
3) Regard money laundering the rules are actually quite simple, the cunning is in getting into the mindset of looking for those potentially revealing factors. As such some degree of separation between professional bodies and their (for AML purposes) regulator doesn’t seem to be a issue.
I’ll end by saying that it is that age old problem of (in the somewhat sheepish and yet spot on) in the words of the Gambling commission “the profit motive crowding out the regulatory framework.”. And I’ll note that since a fish rots from the head, a bit of political leadership on the issue would be welcome. Its all very well the PM making pleasing sounds about “Hot Russian money” but since that seems driven more by global diplomacy it rather undermines the message. AML laws don’t just apply to countries we’re currently having a disagreement does it? having a disagreement does it?