Legal regulator condemned the decision not to name underperforming regulators
The UK’s Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has identified weaknesses in anti-money laundering (AML) supervisory approaches within the legal sector, The Law Society Gazette reported.
The OPBAS’ decision not to name underperforming regulators has drawn criticism from the Law Society of England and Wales.
OPBAS, established in 2018 to oversee 22 professional body supervisors (PBS) across the legal and accounting sectors, found that none of the PBSs assessed were fully effective in all areas of AML supervision. OPBAS released a report covering assessments from nine PBSs as of July 2024, which revealed significant gaps in effectiveness, with most bodies either declining or showing no improvement compared to the previous year. Only three PBSs showed incremental improvements, while OPBAS intervened in two instances to address material ineffectiveness.
OPBAS highlighted that supervisors in the legal sector performed better in governance than those in the accountancy sector but noted weaknesses in the design and execution of supervisory approaches. One PBS in the legal industry, for example, had failed to establish proper timelines for remediation in its supervisory action.
Despite these concerns, OPBAS also pointed to some effective practices, such as one PBS’s risk-based approach to AML supervision, which included targeted inspections of firms classified as high-risk and compliance checks for medium and low-risk firms.
Andrea Bowe, specialists director at the Financial Conduct Authority (FCA), which oversees OPBAS, emphasized the need for improvement. "We are still not seeing the consistent, effective improvement we need. Tackling financial crime is a key priority for the FCA, and OPBAS will focus on improving the consistency and effectiveness of PBSs as part of this work," Bowe said in a statement.
The Law Society expressed disappointment that OPBAS did not name the PBSs identified as failing. A spokesperson stated, "It is unhelpful that the OPBAS report does not name the PBSs which are identified as failing. The UK’s legal profession remains one of the world’s most regulated sectors in the fight against money laundering."
Dr. Susan Hawley, director of Spotlight on Corruption, echoed the concerns, stating that the current system of AML supervision by professional bodies is not working and called for more decisive actions against failing supervisors.
The report noted a decline in both the number and value of fines issued by PBSs, adding further concern about the overall effectiveness of AML enforcement within the sector.
