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The UK government has released a new consultation considering possible reforms to anti-money laundering supervision, following an earlier review into the regulatory and supervisory regime that concluded some weaknesses in supervision might need to be addressed through structural reform.
The UK could be set for a single anti-money laundering supervisor, or an SAS, should proposals in a new consultation by HM Treasury (HMT) come to fruition.
In proposals set out by HMT, all anti-money laundering and counter-terrorist financing (AML/CTF) work would be carried out by a single supervisor.
This would combine the work currently carried out by the UK’s Financial Conduct Authority (FCA), the Gambling Commission (GC) and HM Revenue & Customs (HMRC), as well as professional services supervisors (PBSs).
Further, the SAS would mean the winding down of the UK's current Office for Professional Body Anti-Money Laundering Supervision (OPBAS).
OPBAS, established in 2018, supervises the 25 PBSs in the legal and accountancy sectors.
Under this reform, there would be no other AML/CTF supervisors, echoing changes being outlined in the EU under the Anti-Money Laundering Authority (AMLA) regulations.
Germany too has also been pushing for reforms like this as it currently has 300 AML supervisory bodies.
According to the UK government, the creation of the SAS could have “many of the same benefits” as a single professional services supervisor.
For example, it would address the lack of consistency in risk-based supervision in the legal and accountancy sector and bring about a common, transparent and predictable approach across the entire regulated sector, HMT said.
Further, it would provide better pooling of data and resources.
For example, more resources could be focused on areas of highest risk and it could improve linkages between different parts of the supervised population, allowing better monitoring of threats and suspicious activity across the regime, and enhancing risk understanding.
New risk
HMT’s consultation highlights possible weaknesses with this reform, arguing that a lack of expertise on sector-related areas could be a concern under a SAS.
The creation of a SAS could also risk creating silos of knowledge, HMT warned.
“AML/CTF risks are very interconnected with other risk channels and financial crimes, such as fraud, market abuse and tax matters”, the consultation acknowledges, adding that, currently, supervisors use their understanding of interrelations in these areas to assess risk.
Therefore, creating a new body which carries out only AML/CTF functions could lead to a reduction in understanding of cross-cutting aspects of financial crime, and the insights this provides.
Here, HMT has suggested that memoranda of understanding (MoUs) could be used to enhance information sharing between the supervisors.
Stakeholders now have until September 30 to respond to HMT with their views on its plans for anti-money laundering regulation.
