To describe the legal profession’s anti-money laundering regime as byzantine would be an understatement. Above the multitude of regulators sits the inelegantly titled Office for Professional Body Anti-Money Laundering Supervision, ‘supervisor of supervisors’. Throw in the accountants, and OPBAS oversees no fewer than 25 professional watchdogs.
The office itself, meanwhile, sits within City watchdog the Financial Conduct Authority – which in turn is accountable to HM Treasury.
Stay with me, for reform is coming. Last week, the government set out proposals for the FCA to become AML supervisor for around 60,000 firms in the legal, accountancy, trust and company services sectors. Its 59-page document was several months in the drafting after the change was announced last October. We still don’t know what or how law firms will pay to be supervised by the FCA, which will be the subject of another consultation. Nor has the government yet done much to allay fears that the switch will add to the practice compliance burden.
Even more important, of course, is the question of whether the government’s blueprint for an AML ‘super-regulator’ will actually work. One stakeholder yet to be convinced is Spotlight on Corruption, the UK charity which seeks to ‘shine a light on the UK’s role in corruption at home and abroad’.
Spotlight’s reservations merit consideration, if not (necessarily) endorsement. Most pertinently for this audience, the charity warns that failure to give the FCA powers to compel disclosure of material protected by legal professional privilege – only in limited circumstances where this is necessary for the effective AML supervision of lawyers – will ‘critically undermine’ the FCA’s ability to supervise the legal sector effectively.
The charity also criticises proposed transition arrangements, noting that the government has opted to give OPBAS no additional powers despite some bodies (including the Law Society) being open to the suggestion. This lacuna ‘risks letting underperforming professional body supervisors off the hook’ ahead of the transfer.
One objection that is indubitably valid, meanwhile, is Spotlight’s complaint that the fees law firms (and others) will pay to be supervised will not be ringfenced for AML supervision.
Are you prepared to cross-subsidise the regulation of bankers when the FCA is strapped for cash? Thought not.
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