The Institute of Financial Accountants (IFA) has warned of “significant risks” to the UK financial system if government proposals to create a single AML regulator go ahead.
In its response to HM Treasury’s AML supervisory consultation, submitted on 29 September, the accountancy membership body argues in favour of the proposed OPBAS+ model, which would enhance the powers of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) and increase the effectiveness of professional body supervision (PBS), viewing it as the only viable option for change.
This follows a joint letter from Accountancy AML Supervisors’ Group (AASG) to HM Treasury Lords Minister Baroness Penn, representing the 13 Professional Body Supervisors (PBSs) that oversee AML/CTF compliance for the accountancy sector in the UK, which includes the IFA.
In the correspondence dated 29 September, the AASG expressed its concern for some of the models proposed in the Treasury’s consultation on ‘Reforming anti-money laundering and counter-terrorism financing supervision.’ It stated “we believe only one of the models can support that ambition within a reasonable timescale, and without significant risks or costs: Model 1 (OPBAS+). The other three models carry with them significant risks which at best could see money laundering grow and at worst see the whole supervisory regime collapse.”
In its own response to the consultation, although the IFA recognises the need for reform, it feels the AML/CTF supervisory regime has been greatly enhanced since the introduction of OPBAS in January 2018 and that increased supervisory effectiveness should be the primary objective. It also cites the importance of focusing on the aim of granting it additional powers.
Tim Pinkney, Vice Chair of AASG said: “We believe that the OPBAS+ model is by far the easiest, quickest, most streamlined and least disruptive to implement. This option best meets the objective that ‘structural reform be implemented swiftly’ with less disruption to the regime than would occur with the other proposed models. It will also maintain supervisory effectiveness throughout the transition period which we believe is another key advantage of the OPBAS+ model.
“The effectiveness of the UK’s AML supervision in the accountancy sector has continually improved since OPBAS was established. In order to deliver the change that the government wants, it should build on this progress to ensure PBSs are held accountable, expertise is retained in the sector, failure risk is managed, and disruption and costs are kept to a minimum.”
The other proposals included a PBS consolidation model, yet the IFA stresses there would be a risk with this option that low-risk firms do not receive adequate supervision.
Pinkney continued: “The majority of IFA supervised firms are sole practitioners with few employees, and it is not clear how a UK-wide supervisor would have and maintain a consistent approach across the range of size of firms and the different services provided in such a way as to be able to demonstrate improvements.”
The IFA is also unconvinced that the remaining two options, a single professional services supervisor model and a single AML supervisor model, will have an impact on supervisory effectiveness and feels it could well result in a decline. In addition, it fears the cost of setting up and running either model would also be extremely costly to the taxpayer and not proportionate to the problems the consultation seeks to solve. It further argues that in the current difficult economic climate, these costs and bureaucratic burdens to businesses and the taxpayer would be difficult to justify.
Pinkney concludes: “Our endorsement of the OPBAS+ option is not only in the best interests of our members, but in our view also the UK economy. The other proposals could weaken AML regulation and encourage further criminal activity which will have damaging consequences for businesses already facing a multitude of challenges.”