On 27 November 2015, Transparency International (TI) published a research report “Don’t look, won’t find: weaknesses in the supervision of the UK’s anti-money laundering rules” which claims to identify serious weaknesses in the UK’s AML regime and called for a radical overhaul of the system.
The research evaluates the implementation and supervision of AML rules across a range of sectors in the UK (financial services, accountancy, legal services, luxury goods, property and trust and company service providers) in order to assess the persistency of the money laundering problem. The findings of the report show that most of the sectors are performing very poorly in terms of identifying and reporting money laundering risks. More specifically, in the financial services sector, the report identifies the following failings:
- A third of banks dismissed serious money laundering allegations regarding their customers without adequate review.
- The level of suspicious reports (SARs) in the financial services sector is higher than in others, with a 5% to 10% relative reporting rate.
- However, despite the high levels of SAR reporting in the financial services sector, there are persistent problems with compliance and awareness of how to make effective AML decisions.
- TI finds that the FCA leads the UK supervisors in terms of enforcement and has a wide range of risk identification supervisory tools. However, TI questions whether the level of fines imposed has a sufficient deterrent effect.
The report recommends that effective supervision can only be achieved through following risk-based regulation, imposing effective and transparent sanctions and avoiding conflicts of interests.
The report concludes that none of the supervisors surveyed provide a sufficient deterrent to those who may engage in money laundering and recommends that the UK government should overhaul how AML standards are overseen to achieve consistency, integrity and accountability in the supervisory system. The UK government should also ensure adequate levels of enforcement against AML failures and provide better information about money laundering risk to the private sector. TI proposes that the UK should create one independent and accountable national supervisory body to replace the current system of 22 supervisors responsible for overseeing money laundering risks across different sectors in the UK.