AML super regulator the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) says it has found ‘weaknesses in the design of supervisory approaches’ in the legal sector’s supervisors.

OPBAS’ report found none of the professional body supervisors (PBS) in both the legal and accounting sector was fully effective in all areas. The super-regulator, set up in 2018, supervises 22 PBS across the legal and accountancy sectors. Supervisors in the legal industry include the Solicitors Regulation Authority, Bar Standards Board, and CILEx Regulation. 

Though most such bodies can demonstrate compliance with their obligations under the money laundering regulations 2017, the report states, ‘there remains a lack of full and consistent effectiveness across the PBSs we assessed this year, with none yet fully effective in all…areas’.

The report, which sets out findings from OPBAS assessments of nine PBSs and additional activities including ‘deep-dives’ on advocates and barristers, bookkeepers and conveyancers, provides an overview of AML supervision as of July 2024.

It states: ‘Of the nine PBSs we assessed, most had marginally declined or remained static in overall effectiveness, with incremental improvements observed in just three PBSs. OPBAS intervention was required to address material ineffectiveness and compliance concerns at two PBSs.’

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Those in the legal sector ‘performed slightly better’ on their governance arrangements than those in the accountancy sector, the report states. However it found ‘weaknesses in the design of supervisory approaches’ with PBSs in the legal sector found to not perform well. One legal sector PBS was found to have not implemented timescales for supervisory action in its remediation work.

The report also found the number and value of fines issued had declined from the previous year.

Looking at case studies, the report acknowledges effective practice in one legal PBS’ risk-based approach to supervision complimenting the PBS’ grading of members’ risk profile, as well as targeted inspections on firms with a high-risk scoring and compliance assurance checks on medium and low risk firms.

Other PBSs overseen by OPBAS in the legal sector include Faculty of Advocates, the Council for Licensed Conveyancers, The Law Society of Scotland, the General Council of the Bar of Northern Ireland, and The Law Society of Northern Ireland.

Andrea Bowe, specialists director at the Financial Conduct Authority, said: 'The FCA is committed to playing a leading role in reducing and preventing financial crime. Through OPBAS, we have intervened to tackle failings where we have found them. However, we are still not seeing the consistent, effective improvement we need. Tackling financial crime is a key priority for the FCA. OPBAS will focus on improving the consistency and effectiveness of PBSs as part of this work.’

Dr Susan Hawley, director of pressure group Spotlight on Corruption, said the report shows that leaving the policing of money laundering rules to professional bodies 'isn’t working and that things are getting worse. Failing supervisors should for starters have their policing role removed from them as early as possible.’