UK tightens defences against money laundering

The Economic Secretary to the Treasury, Simon Kirby, has unveiled plans to create a new watchdog that will tackle potential weaknesses in the supervisory system that criminals and terrorists may be trying to exploit.

The new Office for Professional Body Anti-Money Laundering Supervision (OPBAS) will help improve the overall standards of supervision and ensure supervisors and law enforcement work together more effectively.

OPBAS will complement the updated Money Laundering Regulations, published today (15 March 2017) in draft, which seek to bring the UK’s Anti Money Laundering (AML) and Counter Financing for Terrorism (CFT) regime into line with the latest international standards. These regulations set out robust new standards of supervision, including requiring that all supervisors draw on common factors when developing their risk assessments, and maintain records of their investigations and decisions on disciplinary action.

Sectors at risk of being used to facilitate money laundering and terrorist financing are supervised by 25 organisations, 22 of which are accountancy and legal services providers’ professional bodies. Professional body AMLsupervisors bring substantial benefits to the regime, as they are closest to the innovations and emerging risks in their sector. However, having several organisations supervising the same sectors and issuing guidance can lead to inconsistencies which criminals may look to exploit. Research shows that serious and organised crime costs the UK at least £24 billion every year.

The government is determined to tackle this issue. The creation of OPBASwill ensure consistent high standards across the regime, whilst imposing the minimum possible burden on legitimate business. OPBAS will set out how professional body AML supervisors should comply with their obligations in the new Money Laundering Regulations and ensure they do so, with the powers to penalise any breaches of the new Regulations.

As guidance is updated to reflect the new Regulations, the government will work to approve one piece of AML guidance for each sector to reduce and simplify the amount of guidance businesses need to follow. This tailored guidance will complement the Joint Money Laundering Steering Group Guidance and the Financial Conduct Authority’s (FCA) crime guide.

The updated Money Laundering Regulations will also provide clarity for firms on how they should treat Politically Exposed Persons (PEPs). The Government response outlines a series of steps to address concerns about the unjustified and disproportionate withdrawal or potential restriction of financial services from domestic PEPs, their families and close associates. The FCA will publish specific guidance on the treatment of low- and high-risk PEPs and will consult shortly.

Simon Kirby, Economic Secretary to the Treasury, said:

This government has already done more than any previous government to tackle the threat of money laundering and terrorist financing, including setting up the Panama Papers Task force, hosting the London Anti-Corruption Summit in May and recovering a record £255 million from criminals in 2015/16. The UK is a world-leader in the fight against corruption, money laundering and terrorist financing.

But more can be done. The new Money Laundering Regulations and the new Office for Professional Body AML Supervision will bring the UK’s anti-money laundering regime into line with the latest international standards, and ensure consistently high standards of supervision across all sectors, sending a strong message that money laundering and terrorist financing should not and will not be tolerated.

OPBAS will be housed in the FCA and will operate within the FCA’s existing governance arrangements. It will be funded through a new fee on professional body AML supervisors and legislated for by the end of the year. OPBAS should be operational by the start of 2018. Today, the government has launched a Call for Information on its powers and mandate.

These changes are being introduced in response to the Call for Information on the AML Supervisory Regime and the Cutting Red Tape Review of the UK’s Anti-Money Laundering and Counter Financing of Terrorism Regime. These identified ways to improve the effectiveness of the supervisory regime by removing unnecessary burdens without having a material impact on the fight against money laundering.

Business Minister Lord Prior said:

The Cutting Red Tape review asked firms to identify needless, confusing or unclear bureaucracy that could constrain legitimate business and distract from the fight against money laundering and terrorist financing.

We are committed to making the system work better for the majority of law-abiding British businesses. The evidence submitted from a wide range of businesses, trade bodies, NGOs and other organisations has been invaluable in developing our approach to removing unnecessary burdens while stepping up the fight against money laundering.