OPBAS Report: Legal and Accountancy Bodies Must Step Up AML Supervision

In a new report, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has set out a case for anti-money laundering supervisory reform to help professional body supervisors (PBSs) “achieve full and consistent effectiveness.” 

The report follows the government’s review of the UK’s anti-money laundering and combatting the financing of terrorism (AML/CFT) regulatory and supervisory regime in July 2022, which noted that, while solid progress had been made in recent years, there was scope to go further.

Key Findings from OPBAS

The findings from OPBAS’ 2022/23 assessment mark the supervisory body’s fourth report. While multiple weaknesses were noted, the following improvements from OPBAS’ 2021 report were also outlined: 

• Enforcement action: According to the Treasury’s 2022 report, PBSs issued nearly double the amount of financial penalties in 2021-22 compared to the year prior. 
• Sanctions: PBSs supported the work of the Office of Financial Sanctions Implementation (OFSI) and contributed to the implementation of sanctions following the Russian invasion of Ukraine. OPBAS noted specific improvements in undertaking targeted sanctions work, thematic projects, data collection, and issuing guidance to supervised populations.
• Intelligence and information sharing: The number of Shared Intelligence Service (SIS) uploads registered by PBSs in 2022 more than doubled from OPBAS’ previous report, with some PBSs increasing uploads of active investigations. 

However, OPBAS said some legal and accountancy bodies must “step up their efforts if they are effectively to fulfill their role as the first line of supervisory defense against AML threats.” While the supervisory body explained that the need for iterative improvements is partially due to OPBAS’ high expectations and rising standards, supervisory reform is vital to tackling financial crime. 

The main weaknesses identified in its assessment included:

• Ineffective risk-based approach: Concern was raised over professional bodies not having a fully effective risk-based approach. OPBAS noted that most PBSs only adopted a risk-based approach to “high-risk supervised populations” but did not apply the same processes when monitoring the medium- to low-risk population.
• Weak supervisory activity: OPBAS found that most assessed bodies were only partially effective in taking timely and adequate corrective actions. In many cases, too much time was given to supervised populations, allowing them to rectify their AML deficiencies when a more robust intervention was necessary. 
• Inadequate intelligence and information-sharing arrangements: While the number of SIS uploads increased, OPBAS determined that all PBSs need a cultural shift in their approach to information-sharing after finding none of the assessed bodies maintained adequate arrangements in this area. 

UK AML Supervisory Framework

In 2018, the government established OPBAS to strengthen the UK’s AML supervisory framework and address inconsistencies in supervision. OPBAS’s objectives are to reduce the threat of money laundering and terrorist financing by: 

• Ensuring a robust and consistently high standard of supervision by PBSs. 
• Facilitating collaboration and information and intelligence sharing between PBSs, statutory supervisors, and law enforcement agencies.

According to the UK’s National Risk Assessment (NRA) of money laundering and terrorist financing 2020, it is estimated that serious and organized crime costs the UK economy at least £37 billion annually. Furthermore, the NRA identified that the risk of money laundering through the accountancy and legal sectors remains high. 

To help mitigate the threat of financial crime through the accountancy sector, compliance staff can review the guidance produced by the Consultative Committee of Accountancy Bodies. Published in May 2022, the advisory helps accountancy-related businesses meet their obligations for money laundering supervision, including customer due diligence (CDD), record keeping, and reporting suspicious activity.

Key Takeaways

PBSs should be aware that OPBAS will undertake its supervisory assessments against the updated sourcebook, which was revised in January 2023. In this document, firms can review guidance relating to the following:

• OPBAS’ approach to supervision.
• Implementing strong governance structures.
• Adopting a risk-based approach.
• Using a range of supervisory tools.
• Designing, implementing, and maintaining organization‑wide intelligence-sharing policies and procedures.
• Appointing a nominated officer to report knowledge or suspicion of money laundering and/or terrorist financing.
• Creating a flexible, tailored training plan to meet staff needs. 

Additionally, compliance teams should stay up-to-date with OPBAS’ other projects involving trust or company service providers (TCSPs), sanctions, risk identification and verification (RI&V), and proliferation financing risks. These projects align with the supervisory body’s priorities for the year ahead, which include:

• Developing the country’s new NRA.
• Supporting Companies House in the implementation of reforms.
• Monitoring PBSs’ work with their supervised populations on the sanctions regime to ensure that accountancy and legal service providers play their part in reducing sanctions evasion.
• Facilitating cross-organizational intelligence and information-sharing initiatives to strengthen collaboration.