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.

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9 Responses to Too much of a bad thing

  1. CDWOS says:

    Susan, Thank you for your good news story for the offshore “dodgy, crooked and obviously illegal” offshore centres who appear to be making a much better fist of now only implementing their AML/CFT regimes but also controlling and running them. IFCs 1 UK 0!! Margaret Hodge and Andrew Mitchell take note. Look to the mote in your own eye before casting the first stone!

    • Always glad to oblige, CDWOS! But if you are in the Jersey-flavoured offshore centre, don’t forget that your AML legislation is now rather behind the curve – hopefully the JFSC will get around to updating the Order to MLD4 (and perhaps even MLD5) standard once they have finished with the National Risk Assessment. We’re none of us perfect!

      • CDWOS says:

        Can’t disagree with you in the light of our sister Island’s November update but it seems a sad reflection on the UK implementation to date that even allowing for us slipping behind the curve we remain in many areas further forward than the UK AML regime. One would have thought that by now we would all be closer to a more consistent understanding and interpretation of the AML requirements but then none of us want to be exactly the same as everyone else whether at the personal or jurisdictional level!

  2. Gareth Marklew says:

    If some of the responses to are anything to go by, there does seem to be a bit of a perfect storm of problems. Some of the supervisory bodies aren’t supervising, and some of the supervised have a worryingly poor attitude to their obligations. Take this comment, for example (the first response to the article):
    “I am not getting paid for policing for Her Majesty’s Government.” No, but if they ignore their AML responsibilities there’s a good chance that they are being paid, whether knowingly or not, to facilitate and enable serious and organized crime. Or another great one. “ID checks are largely pointless, and serious money launderer will have ID good enough to pass our tests.” Firstly, I’d question the apparent distinction between serious and non-serious money launderers. Secondly, nobody should be suggesting that ID checks alone are enough to prevent money laundering – but in the context of the various other checks that should be being carried out, they’re vital. If the commentators on Accounting Web don’t understand that, I do worry about how much they fully “get” money laundering – maybe you need to offer your services there!

    • Those comments are so disappointing, Gareth – although perhaps only malcontents would bother to comment. The last one makes me very sad: “I am compliant, but resent every minute I waste on it.” Waste? The fight against crime, a waste? They need to remember that AML is not just a paper exercise for the pleasing of regulators: it’s how we keep crime at bay. I would offer my services but I fear that it would be a horribly depressing experience…

  3. Kerry Morgan says:

    Guernsey Press article, April 03, 2019. ‘Public registers will not stop criminals using a false name’, former CEO of Jersey Finance. Why are we bothering with AML at all, when senior figures make statements such as the one made above? Apparently, it’s not about secrecy, it’s about the right to privacy……If we can’t even be bothered to correctly identify ultimate UBO’s because we fear loss of business to other, less ‘open’ jurisdictions, surely our registry’s are as complicit in facilitating financial crime as those that commit said crimes. It’s shameful that we’re hiding behind the voile of ‘privacy’. We all know that privacy is not what this is about. It’s about potentially losing hundreds/thousands of jobs. At some point, you have to pick a side.

    • Thank you for your comment, Kerry, and welcome to the blog. Yes, the age-old deliberation about secrecy vs privacy – it seems to depend on your perspective. And I agree absolutely with your observation about retaining business. Have we perhaps reached the stage where being the most AML-ish jurisdiction (rather than one offering high levels of privacy/secrecy) will be a selling point?

  4. Pingback: Another disappointing report card | I hate money laundering

  5. Pingback: Another disappointing report card - Art Money Provenance

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