A new year, a new role for the Financial Conduct Authority (FCA). On 18 January 2018, the UK’s new Office for Professional Body Anti-Money Laundering Supervision (OPBAS) comes into effect. OPBAS is intended to be a ‘supervisor of supervisors’ with the aim of ensuring that professional body anti-money laundering supervisors comply with the UK’s anti-money laundering obligations.
Why is OPBAS needed?
The creation of OPBAS follows concerns raised in the UK’s 2015 and 2017 national risk assessments on money laundering and terrorist financing. These found inconsistencies in the UK’s professional body supervisory regime. The significant number of designated ‘self-regulatory organisations’ (SROs) was cited as a particular concern (there are 22 SROs for just the legal and accountancy sectors). Deficiencies in information sharing between SROs were also noted.
Further, Article 48 of the Fourth Money Laundering Directive (MLD4) obliges Member States to require that competent authorities effectively monitor and take necessary steps to ensure compliance with the Directive. The creation of OPBAS, along with the introduction of the Money Laundering Regulations 2017, is intended to give effect to this requirement and to strengthen the UK’s anti-money laundering supervisory regime.
How will OPBAS work?
The Government launched a consultation on 20 July 2017 on the draft regulations that support OPBAS. The response to the consultation – along with the finalised regulations – was published in December 2017.
OPBAS will function as part of the FCA. It will have the authority to use information gathering powers, request skilled persons reviews and issue directions to SROs in pursuit of its statutory objectives. If an SRO is found to have failed to comply with its obligations under the Money Laundering Regulations or provided false or misleading information, then the FCA via OPBAS will have the ability to publicly censure it or recommend it be removed as a designated SRO. Such sanctions are subject to the FCA’s usual decision-making processes. There will be a right of appeal to the Upper Tribunal.
Confidential information gathered by OPBAS will be subject to protections. In line with the FCA’s information gathering powers more broadly, inappropriate disclosure of an SRO’s confidential information is made a criminal offence by the regulations.
Immediate thoughts for those in the regulated sector
Firms may justifiably be sceptical whether the creation of a new regulatory function within the FCA will indeed reduce regulation and streamline the UK’s anti-money laundering regime (which are the Government’s stated aims following its report on Cutting Red Tape: Review of the UK’s AML and CTF regime).
For example, while OPBAS now plays the key role in authorising SROs, the statutory power to designate a new SRO (or indeed remove an existing SRO for non-compliance) remains with HM Treasury. Certain sectors may also face dual supervision – e.g. by HMRC and by an SRO in turn supervised by OPBAS (this risk of a two-tier system was noted in the consultation response).
Nonetheless, on a positive note, OPBAS cannot use its information gathering powers directly against firms in the regulated sector – only SROs. Further, OPBAS will collect and summarise annual questionnaires from SROs and publish anonymised reports. These reports may be a useful source of information for regulated firms themselves. If the experience of the Joint Money Laundering Intelligence Taskforce in the financial sector is anything to go by, there are considerable benefits in improving the collective understanding of money laundering.
Will OPBAS make a material difference to the UK’s anti-money laundering regime? There will be an answer in four years: HM Treasury must report on its effectiveness by June 2022 (to align with the first review of the Money Laundering Regulations 2017). In the meantime, the granting of further AML supervisory powers to the FCA all but guarantees money laundering will remain at the top of the FCA’s agenda for the near future.