AML supervision reform risks increasing economic crime

• The City has been referred to as the ‘London laundromat’, suggesting too little has been done to stop economic crime. 
• A new consultation paper from HM Treasury proposes four possible models for reform. 
• The IFA believes reform is needed. 
• Three of the four proposed models carry significant risk, however, and are likely to increase economic crime.
• The IFA has responded to the consultation paper and, along with other supervisory bodies, has written to Baroness Penn, HM Treasury Lords Minister to share insights and concerns.

As one of 13 Professional Body Supervisors (PBSs) overseeing compliance with anti-money laundering and counter-terrorism financing (AML/CTF) regulation for the accountancy sector, the IFA has responded to the government’s consultation paper on reform to anti-money laundering and counterterrorism financing supervision.

The government proposed four models for reform without favouring any. While there is a clear need for reform to better tackle economic crime, the IFA and other PBSs agree that only one of the proposed models can achieve that ambition in an efficient manner, without significant risks or costs.

“The other three models carry significant risks which at best could see money laundering grow and at worst see the whole supervisory regime collapse,” the PBSs wrote in a joint letter to Baroness Penn, HM Treasury Lords Minister.

The PBSs, which have consulted closely with HM Treasury on the reform proposals, have identified risks around transition and failure, loss of expertise, and feasibility in the three models.

The preferred model: OPBAS+

The one model that would meet the reform objectives, OPBAS+, would increase the powers of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), which sits within the Financial Conduct Authority and holds 25 supervisory bodies accountable.

It would not dismantle OPBAS, but instead strengthen it and support a goal OPBAS leadership signalled earlier this year to ramp up its regulatory action.

“We will be looking to make greater use of all our regulatory tools, including enforcement action where appropriate, to make sure PBSs continue to improve and fulfil their obligations,” OPBAS Director of Specialists Emad Aladhal had said in April.

The OPBAS+ model can support that ramping up. While the consultation asserts it would provide only incremental change, the IFA and its fellow PBSs argue that the level of impact OPBAS could have rests entirely on the powers granted to it and the actions it is enabled to take.

Greater powers and resources would empower OPBAS to hold PBSs accountable for their supervision, and support the enhancement of existing information-sharing systems between PBSs and OPBAS.

“OPBAS+ is the only model that can build on this progress and deliver meaningful change without substantial risk,” the PBSs wrote to Baroness Penn. “It would be far more effective than dismantling the regime and starting again.”

Risks of the three other models

Transition and failure risk

Maintaining money laundering supervision in a period of transition would present an enormous administrative risk.

Without an impact assessment during consultation, the risks of transferring data from 22 PBSs are unquantified.

Ahead of the FATF’s 2026 Mutual Evaluation Review, other unnecessary risks that would be introduced by the three models include:

• Data compromise 
• Supervisory collapse in a prolonged transition
• Undetected or lost money laundering cases
• Collapse of the AML regime, should a consolidated PBS fail and an already-stretched HMRC be unable to pick up the slack

Loss of expertise

Multiple PBSs are in place because of the variety of expertise needed for accountancy supervision as well as the scale of the regulated profession.

Expertise is critical to achieving the aims of reform, but gaining that expertise within a single regulatory body would present an immense, time-consuming and expensive challenge – the three models would be highly likely to lose expertise.

Feasibility

The consultation is clear in prioritising feasibility – yet it does not clearly assess the significant costs and inefficiencies of the three models, which would unnecessarily burden either firms or taxpayers.

Read the full letter to Baroness Penn and the IFA’s response to the consultation.