The government is to impress on the Financial Conduct Authority the need to make the process of becoming the legal sector's money laundering regulator as smooth as possible.
In a consultation response published by the Treasury over the transfer of powers from the Solicitors Regulation Authority to the FCA, the government acknowledged that lawyers had misgivings about dual regulation, added confusion and extra enforcement action.
Treasury minister Rachel Blake insisted that the FCA’s expanded role was critical to the U’’s efforts to combat money laundering and sought to assuage concerns from the legal profession about this dual regulation they will be subject to. ‘Throughout the process, the government’s approach has been to build on existing powers where they are sufficient, to introduce targeted improvements where necessary, while aiming to ensure that any new powers are proportionate and do not create extra burdens on firms,’ said Blake.
The consultation response set out several areas where legal professionals had said they were worried about the unintended consequences of transferring AML regulation to the FCA. A number of respondents supported the proposal of the FCA maintaining a register of law firms in scope of the MLRs, but said the proposal risked imposing unnecessary burdens on firms. They also pointed out the public might be confused by law firms appearing on multiple statutory registers and said their registration should be automatically passported by the SRA.
The FCA is likely to extend its 'fit and proper' requirements to law firms and many in the sector argued this was unnecessary, saying that solicitors already undergo rigorous statutory fitness and propriety assessments.
Concerns were also raised that FCA testing could interfere with the independence of legal regulators or contradict their decisions, leading to uncertainty over who has primacy.
The Treasury said that to ensure proportionality and minimise burdens during transition, it will incorporate supporting measures to ensure structured information-sharing arrangements between the FCA and current professional body supervisors including the SRA.
Its response added: ‘HM Treasury is conscious of the risk of duplication of requirements on firms as a result of supervision reform. We will ensure that the FCA and existing PBSs have the means to share information and cooperate effectively to minimise burdens.’
There was no date for when the changes will come into force and the government says reform will require primary and secondary legislation.
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