New economic crime legislation at risk from AML supervisory reform proposals

Good work of the Economic Crime and Corporate Transparency Act could be undermined by mooted reform of OPBAS.

The recent introduction of the Economic Crime and Corporate Transparency Act (ECCTA) was heralded as major milestone in the fight against financial crime in all its forms. Indeed, at AAT we have been a supportive voice in the development of the legislation and welcome the Act’s introduction. It’s a comprehensive and well-designed piece of legislation that we believe will benefit businesses, regulators, investors and consumers in a number of ways.

However, welcoming the Act we remain concerned that, despite the targeted provisions within it relating to AML, there are other potential changes afoot that could seriously undermine the positive impact that the Act is intended to have.

Specifically our concerns relate to the ongoing discussions taking place around reform of the AML supervisory landscape as articulated in the recently closed HM Treasury consultation.

This is something we feel strongly about: AAT recognises the role that the accountants play as gatekeepers to financial probity and is fully aligned with the ambition as captured in the consultation to strengthen the effectiveness of the anti-money laundering and counter-terrorism financing (AML/CTF) supervisory regime.

Within the consultation HM Treasury set out four proposed models for reform of the AML supervisory regime centred around three core criteria – the need to strengthen the effectiveness of AML regulation, to improve co-ordination among those involved in the supervisory regime, and the feasibility of delivery for each of the proposals. In our response to the consultation we made it clear that we were fully supportive of the intent as articulated by the criteria.

The consultation process, however, has not allowed for a full examination of possible reforms with many critical aspects insufficiently addressed and no impact assessment undertaken to support the proposals. And that in and of itself creates significant risk on top of the immediately identifiable risks pertaining to the proposals as well as running counter to much of the intended impact of the new ECCTA.

In summary, we believed that the proposals as detailed in the consultation were not supported with sufficient details to enable clarity to establish feasibility around delivery (particularly around the transitional phase). Similarly, the proposals didn’t give sufficient detail to help verify the likely impact that they would have in terms of the other two objectives of supervisory effectiveness and improved system co-ordination.

Moreover, rather than prevent it, these risks would potentially give rise to a proliferation of money laundering activity. It begs a serious question: why go to the extent of dispensing with OPBAS (it was only formed in 2018) without giving it a proper chance to deliver through bestowing greater powers on it? Such changes would be a more organic, proportionate and less disruptive approach than the other three options offered.

There are genuine risks, particularly with some of the proposals, that call into question the desire to improve the UK’s position with regard to money laundering and economic crime. And that should be a warning to everyone involved. However, it remains a concern that OPBAS’s work – and the potential changes – is still not widely understood by a significant proportion of those in parliament.

The introduction of ECCTA brings into focus how important it is to take a holistic approach to these matters: fail to align the AML supervisory regime with the broader ECCTA structures and the UK creates a situation where it has weakened its overall position.

As we said earlier this year, a strengthened OPBAS would add real value to the overall picture of the prevention of financial crime. The UK rightly enjoys an esteemed global reputation not only as a financial centre, but as a territory with a commitment to identifying and preventing crime and corruption at all levels of the economy.

However, any sense that it is weakening its AML supervisory structures sends out a very powerful message, as investors, regulators and others begin to think twice about British commitment to combatting the problem.

While OPBAS remains a work in progress it will continue to be ripe for reform. No statutory body can hope to effectively deliver on its remit without regular and sometimes disruptive or painful change. At AAT we are committed to playing our part in that.

But there’s no doubt that the proposed approaches to reforming AML supervision could remove a cornerstone in the UK’s crime prevention wall. By doing so it may be that, rather than strengthening its protections, the advent of the ECCTA leads to more cracks appearing.

Adam Harper is AAT's Director of Professional Standards & Policy..