HM Treasury has published its 2022/23 report on anti-money laundering and counter-terrorist financing (AML/CFT) supervision. Rick Kent, anti-money laundering policy manager at the Law Society, looks at the key changes
Key findings
The report found the following:
10% of supervised firms were considered high risk (in line with previous years).
5.5% of regulated businesses were subject to a desk-based or onsite review in 2022-23. Interestingly, professional body supervisors reviewed nearly 10% of their populations.
The level of non-compliance for firms subject to a desk-based review in the legal and accountancy sectors was 16% and 17% respectively.
But the report highlighted a lack of consistency across the supervisors’ approach to supervision.
Legal (and accountancy) supervisors reported the most common breaches, which were identified as:
- inadequate documented policies and procedures
- inadequate CDD procedures
- inadequate client risk assessment or records
- no or inadequate firm-wide risk assessment
Many supervisors found that a lack of knowledge or understanding of the regulations was a common theme among firms with non-compliance or poor procedures.
This was sometimes due to the size of the firm or their available resource. Often, this was linked to firms using templates or third-party policies without fully tailoring them to the individual firm.
Some supervisors also noted that smaller firms and sole practitioners sometimes considered the regulations to be disproportionate.
The total fines across 25 regulators decreased from £504 million in 2021/22 to £197 million in 2022/23.
The Financial Conduct Authority (FCA) and Gambling Commission imposed higher fines compared to HM Revenue and Customs (HMRC) and supervisors.
Average fines: FCA - £19.4m, Gambling Commission - £2.8m, HMRC - £7,000 and PBSs (including the SRA) - £4,000.
HMRC identified money service businesses, art market participants, and the trust or company service provider sectors as presenting the highest inherent risks for ML.
From the FCA’s perspective, retail banking (including payments), wholesale banking, wealth management and crypto-asset firms posed the greatest risk of being exploited for money laundering.
SRA overview
The number of firms supervised by the SRA for anti-money laundering purposes is 6,007, down from 6,408 in 2022 and 6,516 in 2021.
However, informal action was up sharply, with 110 actions compared to 77 in 2022 and 45 in 2021. Formal action also increased to 41 from 18 in 2022 and 8 and 2021.
The number of enforcement fines levied was down, with 28 cases (totalling £136,602). This is compared to 35 cases in 2022 (coming to £385,476) and 14 cases in 2021 (totalling £163,400).
Upcoming HM Treasury activity
HM Treasury is consulting on improving the effectiveness of the Money Laundering Regulations.
We’re working with members and our Money Laundering Task Force to respond to this consultation before it closes on Sunday 9 June 2024.
If you would like to share your views to inform our response, email rick.kent@lawsociety.org.uk.
HM Treasury is also refreshing the UK’s national risk assessment of money laundering and terrorist financing.
It’s looking for information from 2020 to now on money laundering and terrorist financing threats.
Take part in the questionnaire by Thursday 30 May 2024
HM Treasury is also due to publish its response to its consultation on reforming the UK’s AML/CTF regulatory and supervisory framework.
We responded to this consultation in October 2023: read our full response.
HM Treasury is also carrying out actions from the economic crime plan 2023/26 and preparing for the fifth round of Financial Action Task Force assessments. These are due to start in 2025, to be published in 2028.
