Accountancy bodies told to step up AML supervision

Some professional bodies need to “step up their efforts if they are effectively to fulfil their role as the first line of supervisory defence against AML [anti-money laundering] threats”, according to the Office for Professional Body Anti-Money Laundering Supervision’s (OPBAS) fourth report published today.

The supervisor of the supervisors acknowledged that compliance remains high and was delivering iterative improvements. But the report highlighted areas where the professional bodies could be “more ambitious and strive for full effectiveness” across the AML supervision of its members. 

“[Professional body supervisors] continue to show good levels of compliance… But there is still more effort and action needed to achieve full and consistent effectiveness,” concluded the report. 

Average fine goes up

However, OPBAS recognised progress in enforcement action by the 22 professional bodies it supervises in the accountancy and legal sector.

As reported in the Treasury’s 2022 report, published in December last year, the total sum of fines issued in 2021/22 nearly doubled compared to the year before. 

As an example, the total value of fines dished out by the ICAEW in 2021/22 for breaches of money laundering regulations was £267,002 from 53 fines, compared to £178,947 in the prior year from 59 fines. The trend was seen across the other professional bodies too. 

The average fine for the accountancy sector has risen by 67%, while the combined number of fines issued by the accountancy legal sector increased by 200% since 2018. However, OPBAS questioned that with the average fine being just under £3,000 whether this is a credible deterrent to AML non-compliance.  

Formal enforcement action gets tougher

The OPBAS report analysed the figures from the Treasury and found a 162% increase in formal enforcement action across the two sectors, which included membership cancellations, suspensions and fines since OPBAS was created in 2018 until 2021/22. 

The accountancy sector had a higher proportion of formal or informal action coming from desk-based reviews (DBR) and onsite visits than the legal sector. However, the number of DBR and onsite visits in the accountancy sector actually declined. 

The increase was mainly driven by the rising number of DBR and onsite visits in the legal sector, in comparison to the accountancy sector where the overall number has declined.  

More effective supervision needed

OPBAS flagged concern over the professional bodies they assessed not having a fully effective risk-based approach. Improvements were made but it concluded that “more effort is required to achieve the necessary levels of effectiveness”. 

The supervisory office raised concern that most of the bodies only adopted a risk-based approach to supervising high-risk supervised populations, but didn’t apply these processes to monitor the medium- to low-risk population. 

OPBAS also pulled up the professional bodies for “significant weaknesses”, including giving their supervised population “too much time to rectify their AML deficiencies before a more robust intervention” and having a lack of clear guidance on the type of intervention to take to address deficiencies. OPBAS again used the Treasury report as an example that showed the number of informal actions after a DBR and onsite assessment increased, while the number of formal actions had declined. 

OPBAS emphasised the need for professional bodies to take “effective, proportionate and dissuasive action” to correct AML deficiencies.  

The report also said that professional bodies needed a cultural shift in their approach to intelligence and information sharing after finding that none of those assessed maintained effective arrangements in this area. “They need a fuller focus on how the information they hold might support others’ work to combat economic crime,” concluded OPBAS. 

Elsewhere, OPBAS acknowledged the professional bodies’ effectiveness in implementing sanctions following Russia’s invasion of Ukraine. 

Next steps

The steps OPBAS has taken since its inception in 2018 to strengthen AML supervision coincide with the government putting its full force behind the Economic Crime and Corporate Transparency Bill and the second national Economic Crime Plan. 

The economic crime plan 2 has revealed the government’s ambitions to enforce AML supervisory reform, and OPBAS is planning on playing a part in this overhaul too. 

OPBAS now expects to see “material improvements in effectiveness” in the coming round of professional body supervisory assessments, following the revisions to the OPBAS sourcebook from May 2023. 

Pressure cascades to accountants

The added pressure OPBAS is placing on the accountancy bodies is being felt on the front line of the profession, with regular AccountingWEB reader Ireallyshouldknowthisbut saying that their recent review was around 80% focused on their AML processes and procedures. “They didn’t care much about anything else,” they said. 

The tougher enforcement action from the professional bodies as a result of OPBAS comes after a slew of recent disciplinary cases resulting in high fines for accountants, including the recent case of a sole practitioner who had a total financial sanction of over £23,000. 

With accountancy bodies stepping up their AML supervision, join David Winch and Della Hudson on Any Answers Live on Thursday 4 May at 1pm. The panel will answer your AML questions and discuss what good looks like. Secure your place today!