The government estimates that money laundering costs the UK £100 billion a year. ACCA fears that figure will only increase under the government’s proposed changes to the anti-money laundering supervision regime for the accountancy sector.
ACCA is a Professional Body Supervisor (PBS) for anti-money laundering (AML) in the UK. At least we will be until those powers are transferred to the Financial Conduct Authority (FCA), the UK’s independent financial watchdog.
Last October the government proposed transferring AML supervision and associated enforcement actions for non-compliance to the FCA. You can see how the move makes sense on paper. It would overhaul the current system of 22 professional body supervisors (PBSs) in the legal and accountancy sectors as well as HMRC with a single, central public authority creating – in theory at least – a more consistent, robust, and data-driven oversight.
But ACCA – along with many other professional bodies – thinks the move to a Single Professional Services Supervisor (SPSS) represents a huge administrative challenge which could weaken the fight against economic crime and not address the perceived issues the consultation highlighted. The claims the present system is complex and disjointed leading to inconsistent supervision lacks evidence and the new system won’t solve that, instead another unnecessary layer of supervision is being added.
The incoming regime will end the system where firms in the accountancy and legal sectors are supervised by their relevant professional body. The advantage of the current set up is that professional bodies understand the unique ways their supervised firms operate and the services they provide. This means we can take proportionate and risk-based approaches to how we supervise as well as helping firms understand their obligations under money laundering regulations. And if the firms breach the rules enforcement action is taken.
At some point in the near future the FCA will have the task of building large teams with expertise across a wide range of different sectors, professions and sizes of business. At that point much valuable existing expertise looks like being lost, increasing the risk of economic crime rather than reducing it.
Professional bodies have built up specialised knowledge of their sectors and the specific circumstances that lead to increased money laundering risks in them, dealing with a wide range of firms, from sole practitioners to global giants. The sector is able to take a risk-based approach to AML supervision using this knowledge and this will be harder to build up and replicate in a larger regulator. Being supervised by someone who really knows your business is a strong deterrent of economic crime. This expertise will be lost and take many years for a new supervisor to develop.
The FCA will take years to develop their capability to conduct the same volume of AML compliance reviews currently undertaken by professional bodies who have significantly developed their capability since the updating of the money laundering regulations in June 2017. During this developing period for the FCA there is a risk that criminals seeking to exploit the services of the sector will take advantage.
The government’s consultation on its new approach – setting out the government’s thinking on the key duties, powers and accountability mechanisms that the FCA will need to be an effective supervisor of professional services businesses – has not reassured us that the incoming system will deliver the looked-for results.
ACCA is concerned that the increased cost and complexity of AML supervision will see fewer firms maintain membership with professional bodies. While remaining under the FCA regime for AML, this lack of professional competence oversight as well as regulatory and ethical oversight could lead to a hike in economic crime as well as falling professional standards. It could also lead to business and consumer confusion over the regulatory status of their accountant, with the public thinking that FCA oversight for AML supervision will also ensure oversight of the firms’ competence and ethical standards when it does not.
ACCA does support some of the proposals, including the register of all professional services firms, fit and proper tests, access to suspicious activity reports (SAR), extended information gathering and inspection powers, and an information-sharing regime and believe these are either currently in place or can be achieved through the current regime.
However, ACCA has concerns that the duties, powers and accountability mechanisms will not be practical or proportionate to the risk posed by accountancy firms and will impose unnecessary bureaucracy and costs. This will particularly impact sole practitioners and small practices who will likely see a significant rise in fees.
Under the Single Professional Services Supervisor (SPSS) model, ACCA firms will face the prospect of dual supervision and dual fees for AML supervision and their professional body. Also, the length of time it will take to implement a single AML supervisor could cause considerable disruption in supervision. In a challenging economic climate, these increased costs to businesses, large and small, cannot be justified.
This government says it wants to crack down on dirty money. It is an admirable aim and one we as a professional accountancy body underpinned by ethics fully supports. We just don’t think this is the way to do it.
Read ACCA’s response Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF) Supervision Reform: Duties, Powers, and Accountability | ACCA Global.
