Julia Irvine 30 Aug 2017 03:44pm

Two-tier AML regime puts professional bodies at disadvantage

ICAEW has warned the Treasury that its proposals for the new anti-money laundering (AML) supervisory body could lead to small professional services firms opting to leave the regulatory regime rather than face the additional costs of its increasing obligations

It says that the decision to exclude HMRC and other public bodies from the scope of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) will inevitably lead to a two-tier system, with non-professional service providers able to avoid the rules, leaving professional bodies, such as ICAEW, and their members and clients to pick up the tab for the new regime.

In a strongly-worded response to the Treasury consultation, it points out that “gold-plating an oversight function for the UK’s successful professional services sector, while failing to establish consistent enforcement powers over the high-risk section of the accountancy profession (as well as the other high-risk sectors of banking, gambling, money service bureaux, high value dealers and estate agents) is counterproductive and clearly not in the public interest in a highly competitive global market”.

It adds that despite the fact that one of the main reasons for having an AML oversight function is to remove inconsistencies between supervisors, the Treasury has comprehensively failed to come up with a solution that addresses such a fundamental issue.

The proposed regime will also mean that professional firms will have to pass on any additional costs to clients in the form of higher fees. This will give “an unfair advantage to unqualified, non-professionals who are not required to undergo continuous training or quality review or be subject to any ‘fit and proper’ checks, code of ethics, professional indemnity insurance or disciplinary process”.

“This does not support the public interest nor does it support the government’s aim of making the UK’s financial system a hostile environment for illicit finance.”

Furthermore, it stresses, it cannot be in the public interest if professional service providers choose to leave their highly regulated membership bodies or if their clients go for the cheaper option of a non-professional provider.

OPBAS, which is scheduled to be up and running by the beginning of next year, will be responsible for overseeing the supervisory activities of 22 professional bodies and ensuring quality and consistency. It comes under the remit of the Financial Conduct Authority which is currently seeking views on how the new system will work.

ICAEW makes it clear that public sector bodies should be included in the new regime and, since it is already accepted that the FCA can't supervise them, then the Treasury needs to look again at the alternatives. If there are none, then it must set up a mechanism to ensure that all supervisors comply with the money laundering regulations, as well as the Financial Action Task Force's immediate outcomes and the FCA Sourcebook. This is particularly so where public sector bodies are supervising firms in the same sectors as the professional body supervisors.

As well as ICAEW, the 22 professional body supervisors include, among others, the Scottish and Irish chartered accountancy institutes, the Association of Accounting Technicians, the ACCA, the Faculty Office of the Archbishop of Canterbury, CIMA, the Chartered Institute of Taxation and the Scottish, Northern Irish and English law societies.