The UK’s Struggle with Financial Crime Reaches Institutional Heights

On 23^rd September 2024, the Financial Conduct Authority (FCA) revealed that none of the 25 Professional Body Supervisors (PBS) under its supervision were fully effective in Anti-Money Laundering (AML) controls. PBSs are organisations that oversee and regulate professionals in specific industries, such as accountants and lawyers. They are, in essence, watchdogs for their respective professions, ensuring firms under their supervision adhere to AML regulations.

Notable PBS which fell short of FCA’s expectations include the Solicitors Regulation Authority and the Institute of Chartered Accountants in England and Wales.

The FCA’s Findings

The FCA’s report stresses a troubling reality; many AML supervisors are not meeting the necessary standards to effectively combat money laundering in the UK. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS), a division of the FCA, found that several supervisors lacked the resources and expertise required to enforce AML regulations adequately.

The FCA’s report highlighted some significant failures:

Risk-Based Approach: The FCA is a known advocate for a ‘risk-based’ approach to AML. However, it found that PBSs had difficulties applying this approach, reducing the effectiveness of their supervision.
AML Supervision: A large proportion of PBS were deemed weak in their AML supervisory roles. Their supervisory approaches varied significantly, revealing an inconsistent interpretation and application of supervision.
Enforcement: Despite having a range of enforcement powers and tools, the majority of PBSs did not use them in a dissuasive and proportionate manner
Resourcing: Not all PBSs are prioritising and resourcing their AML supervisory function appropriately.

The UK’s Systemic Problem with Financial Crime

This revelation comes at a critical time, as the UK has been identified as the second worst-offending country for financial crime.

Several factors contribute to the UK’s high rate of financial crime. Amongst PBSs alone, firms within the legal and accountancy sector have been inadequately supervised. Another significant issue is the lack of proactive and dynamic AML frameworks, resulting in a systemic financial crime vulnerability within the UK.

The Way Forward

The FCA’s revelation highlights that no firm, industry or body within its remit is immune from regulatory scrutiny.

This year alone, Complyport has noticed a significant increase in the number and types of firms receiving AML probes and requests from the FCA.

Firms under FCA supervision are encouraged to use these PBSs as valuable takeaways. Assess your firm’s compliance framework, resource allocation and culture towards AML.

Addressing these challenges requires a hands-on approach. Financial institutions must invest in experienced senior employees, integrated systems, technologies and solutions to enhance their AML framework. Moreover, there is a need for a cultural shift across regulated firms to prioritise compliance and allocate sufficient resources to AML programmes.

The FCA’s actions in 2024 have made it clear that they will not hesitate to pursue enforcement for non-compliance in the fight against financial crime.

How Complyport Can Help

Revamping, overhauling and updating your compliance framework may be daunting. From initial gap analysis to implementing remedial actions, ensuring that your firm meets the FCA’s standards does not have to be a journey taken alone. At Complyport, our team of AML experts can assist you with the following: