Anti-Money Laundering Legislation May Create a Two-Tier Regime


Anti-money laundering (AML) legislation that came into effect in June may create a “two-tier regime” due to inconsistent approaches towards accountants that are part of a professional accounting body and those who are not, according to Chartered Accountants Ireland (the Institute).

Key aspects of the AML legislation include requiring increased levels of customer due diligence, risk assessments of businesses to be carried out and establishing registers of beneficial owners.

The legislation also included the proposition to establish a new supervisory body, OPBAS (Office for Professional Body Anti-money laundering Supervision), to be hosted within the Financial Conduct Authority (FCA). OPBAS is tasked with overseeing the compliance of members of 22 professional bodies with the new legislation.

While supportive of the creation of the supervisory body in theory, the Institute expressed concerns that this will lead to a two-tier regime of inconsistent supervision, as it ignores those accountants who are not members of professional bodies. Although these accountants are subject to HMRC supervision, the standards held by HMRC are not as rigorous and technical as those of the professional bodies.

Rachpal Thind, partner at Sidley Austin, commented on the “disparity between the regulators”, as some supervisory authorities such as the FCA are “reactive in enforcing and supervising AML compliance”, while with HMRC “you haven’t seen that active engagement in terms of enforcement action.”

HMRC supervision is outside the scope of OPBAS, so “there is a real risk of the emergence of regulatory arbitrage and supervision shopping”, according to the Institute. The ensuing inconsistencies in some ways defeat the purpose of OPBAS’ creation, resulting in only a “job half done”.

The Institute also raised concerns over the lack of detail provided by the government on what the source of the funding for OPBAS would be.

Aidan Lambe, director of professional standards at Chartered Accountants Ireland, commented: “The regulated accounting profession is being asked to fund a supervisory mechanism that is not fit for purpose and which will drive inconsistent supervision. Government therefore should give further thought to this and bring forward an alternative model that will address this concern.”

“For the most part, we believe that the susceptibility of our practising firms to being used as a front for criminal activity is low.  However, we are concerned that the expectations of regulators such as OPBAS regarding the implementation and application of the new UK AML provisions may have a disproportionate impact on small accounting firms.  It is incumbent on all supervisory and regulatory agencies to have regard to the proportionality provisions that exist within AML legislation.”

Earlier this year accounting bodies raised similar concerns over the scope and funding of OPBAS.

The legislation transposed an EU directive into UK law with an aim to increase transparency in the financial services sector. Rachpal Thind advised companies to ensure compliance with the legislation by “tweaking their customer due diligence procedures” and “focusing on the risk assessments”. She added that the requirement for holistic risk assessments may expose the need for an internal audit function for some firms. Thind also urged firms to not neglect the requirement to identify the source of funds.

She added that firms should be mindful of financial sanctions: “The UK government has beefed up the Treasury’s enforcement powers with respect to financial sanctions. I think over the next few years there’s going to be increased focus on assessing firms complying with the financial sanctions regime, so that’s another area that firms should be looking at their current policies and procedures and if there’s any deficiencies, and addressing those.”

Here are some red flags for accountants to identify money laundering.


This article was first published by Accountancy Age on the 21st August 2017