Regulators in the legal sector still need to make huge improvements in how they tackle money laundering if they want to combat the threat of economic crime. 

A progress report from the Office for Professional Body AML Supervision – effectively the supervisor of the supervisors – said even those regulators who are largely effective should be ‘more ambitious and strive for full effectiveness’.  

OPBAS largely treated the legal and accountancy sectors as a whole rather than assess each regulator, referred to as professional body supervisors (PBSs) in the report, although the report singled out the SRA for praise for increasing its fining powers to £25,000 in the last year. 

Data collected by OPBAS shows there were a record number of desk-based reports by regulators in the legal sector, at a time when these dropped in the accountancy sector.  

The majority PBSs were only partially effective or were ineffective in taking predictable and proportionate supervisory action, with a third of those assessed being largely effective or fully effective. OPBAS found gaps in PBSs’ supervisory policies and procedures which affected timely, predictable, and proportionate interventions to address identified problems. 

Some PBSs, it was found, tended to give their supervised population too much time to rectify their AML deficiencies before deciding whether to take a more robust action. 

A higher proportion of DBRs or onsite visits led to action in the accountancy sector, as compared to the legal sector. 

The number of suspicious activity reports from legal professionals increased to almost 3,000, although the number of these reports submitted by regulators has fallen.  

OPBAS lauded one example where a legal sector supervisor had spotted suspicious activities carried out by a firm on behalf of clients. This led in turn to disciplinary action against two lawyers and criminal prosecutions under the Proceeds of Crime Act, resulting in significant prisons sentences.  

Enforcement action by legal regulators has increased ‘significantly’, with the number of fines in the sector doubling between 2019 and 2022. OPBAS noted that the total value of fines has also nearly doubled, but pointed out the average fine amount was £3,000, ‘raising the question as to whether it is a credible deterrent to AML non-compliance’.  

The report added: ‘OPBAS will continue to take proactive steps to enhance the effectiveness of the AML supervision in accountancy and legal sectors. We expect PBSs to accelerate their efforts to achieve tangible outcomes.’