Treasury gambling unnecessarily with anti-money laundering plans

The Treasury is taking an unnecessary gamble with its low-key plans to meddle with the way terrorist financing and money laundering rules are policed, warns the Association of Accounting Technicians (AAT).

The accountancy body, whose members play a central role in guarding against money laundering for many of the UKs small and medium sized businesses, has said that plans to establish a costly, one-size-fits-all quango responsible for supervising anti-money laundering rules for accountants and lawyers, could expose the UK further to money laundering criminals and terrorism.

In its response to what was a relatively-unheard of Treasury consultation on plans to change the way anti-money laundering (AML) rules are supervised, AAT has warned the Treasury that some of the reforms, which could come into force as soon as April 2024, will severely weaken the UK’s front-line battle against money laundering.

Adam Harper, director of professional standards and policy at AAT, said: “There’s no doubt the UK’s fight against money laundering can be improved. However, some of the proposals put forward by the Treasury are effectively taking a huge gamble with AML, given the risks involved. While we support the strengthening of the existing AML regime, plans to appoint one body, potentially a private entity, to oversee the battle against money laundering and terrorist financing, is a major risk.

“Given the complexities involved in AML supervision, and the variety in the type and sizes of accountancy and law firms currently being supervised by different, specialist bodies, replicating the expertise and knowledge that is currently held by those bodies will be a significant challenge.

“Even the transition period to one oversight body responsible for juggling the way money laundering is policed is a high-risk process. Aside from the data risks involved in the transition, there is another risk that many firms currently supervised will fall off the radar, opening the way for money laundering criminals.”

The National Crime Agency estimates that the amount of money laundered in the UK could be between £36bn and £90bn.

Currently, accountants follow strict laws on money laundering. Their compliance with these regulations is checked and overseen by specialist professional body supervisors, ensuring businesses are protected from economic crime.

Responding to the Treasury’s consultation on AML reform, AAT warns that to expect a consolidated supervisor to be able to develop that level of insight into such a vast supervised population is unrealistic, logistically difficult, vastly expensive, and will take a significant amount of time, particularly when taking into account that some of the existing, specialist bodies have been developing education and professional standards for hundreds of years.

No safety-net

AAT has also flagged to the Treasury that having one overall supervision body would mean there is no safety net should something go wrong.

Adam Harper warned: “If a single body were to fail, whether commercially or for another reason, there would be no ‘safety net’ to cover the supervision. The investment in resources required of a single body supervisor to be able to scale up its operations sufficiently so as to be able to manage the increased demands will be significant and could see the cost to businesses under supervision being increased substantially.

“The fact the government has buried these plans in a consultation and not included them in the heavily publicised Economic Crime Bill, is telling;  it has enabled this high-risk approach to pass by relatively unnoticed.”

AAT backs the Treasury’s proposal to strengthen the current regime, which sees individual, specialist bodies supervise different parts of the professions with an overarching body, OPBAS, ensuring consistency across the board, ready to step in when needed.

The Treasury’s OPBAS+ proposal adds weight to the existing regime, without losing the niche knowledge gained by the individual bodies currently supervising accountants and lawyers, who are the coalface of the fight against money laundering.

Read AAT’s full response to the Treasury here.