On 23 September 2024, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) published its fifth annual report, shedding light on the progress and challenges in anti-money laundering (AML) supervision by Professional Body Supervisors (PBSs). This article summarises key insights from the 2023/24 report, focusing on the effectiveness of PBSs, enforcement gaps, and the strategic steps needed to improve AML supervision.
Overview of the 2024 OPBAS Report
In the September 2024 OPBAS report, the organisation assesses the performance of 22 PBSs in the legal and accountancy sectors, emphasising the importance of AML supervision to protect the integrity of the UK economy. Despite improvements in certain areas, OPBAS continues to identify pockets of ineffectiveness, particularly in enforcement, risk-based approaches, and information sharing. The report highlights the UK’s strong standing in global AML compliance, especially in non-financial sectors like law and accountancy, in line with the Financial Action Task Force (FATF) standards. However, it stresses that no PBS has achieved full effectiveness across all OPBAS expectations, and significant improvements are needed in certain key areas.
Supervisory Effectiveness of PBSs: Mixed Results
The 2023/24 OPBAS supervisory assessments of PBS approach to AML supervision identified a central theme of a lack of consistent effectiveness across these PBSs, with weaknesses particularly in:
- Supervision: Many PBSs struggled with applying a clear methodology for inspections and risk-based supervision. Desk-based reviews, on-site inspections, and hybrid models were inconsistently applied across PBSs.
- Risk-Based Approach: several PBSs failed to substantiate their risk classifications. In particular, high-risk sectors, such as Trust and Company Service Providers, payroll services and conveyancing, were not adequately addressed.
- Enforcement Gaps: Many PBSs relied too heavily on “assisted compliance” measures rather than taking decisive enforcement steps. As a result, the number and value of fines issued in 22/23 declined, despite an increase in supervisory findings of non-compliance.
Key Challenges and Areas for Improvement
The report highlights several recurring themes that hinder the overall effectiveness of AML supervision by PBSs. Addressing these challenges is crucial for ensuring that PBSs can fully meet their regulatory obligations and support the UK’s fight against money laundering.
1 Ineffective Risk-Based Supervision
While OPBAS emphasises the importance of a risk-based approach to AML supervision, several PBSs were found to lack comprehensive risk identification processes. Many PBSs rely on limited risk indicators, for example members' self-declaration, without independent verification of the data. Additionally, although professional services sector provide high-risk services, 87% of firms in this sector were classified as low-risk.
2 Weak Information and Intelligence Sharing
Effective information and intelligence sharing between PBSs, law enforcement, and other stakeholders is essential for detecting and disrupting money laundering activities. However, OPBAS found that many PBSs are reluctant to fully engage with available information-sharing mechanisms such as the Intelligence Sharing Expert Working Groups (ISEWGs) and the Financial Crime Information Network (FIN-NET).
3 Outsourcing of AML Supervision
A significant proportion of PBSs (at least six of the 22) outsource AML inspections to third-party contractors. OPBAS raised concerns about the oversight of these subcontractors, noting that they were often not fully aware of the PBSs’ policies, risk profiles, and procedures.
Steps Forward: Priorities for Improvement
Looking ahead, OPBAS has outlined several priorities to improve the effectiveness of AML supervision by PBSs. These include:
- Enhanced Risk-Based Approaches: PBSs must refine their risk identification and categorisation processes, ensuring they take a more proactive and data-driven approach to risk assessment.
- Stronger Enforcement Measures: PBSs should shift away from relying on assisted compliance and take more decisive enforcement actions, including fines, suspensions, and publicised penalties.
- Improved Information Sharing: OPBAS will continue to work with PBSs, law enforcement, and other stakeholders to promote the use of existing intelligence-sharing platforms.
- Resourcing and Governance: PBSs must ensure they have sufficient staff and resources to carry out their supervisory functions and exercise better oversight of outsourced activities.
The 2023/24 OPBAS report highlights the significant strides that PBSs have made in AML supervision, but it also highlights ineffectiveness and areas where improvement is needed.
With greater scrutiny being placed on PBSs, this will in turn trickle down to level of scrutiny placed on the professional services firms they regulate, particularly in relation to risk identification and categorisation, regular review and monitoring activities and a stronger enforcement approach. DWF Regulatory Consulting remains committed to supporting firms in managing regulatory supervision, navigating complex regulatory challenges and ensuring firms meet their AML obligations effectively and proportionately.
Get in touch today to find out how we can support you in ensuring readiness for a regulatory visit.
