On 26 May 2016, HM Treasury (HMT) published its fifth annual anti-money laundering (AML) and counterterrorist finance (CTF) supervision report. The report covers activity carried out between January 2014 and April 2015 and is framed within the context of HM Treasury’s preparations for the UK’s mutual evaluation by the Financial Action Task Force (FATF) in 2017/2018.
The report evaluates the effectiveness of various approaches taken by supervisors of firms in relation to financial crime risks. It sets out an analysis of qualitative and quantitative data in relation to the approaches taken by supervisors along with case studies of good practice by individual supervisors which demonstrate approaches that manage risk effectively.
HMT set out a number of headline conclusions.
First, the report highlights that there has been increased engagement between supervisors and supervised businesses during 2014 to 2015. Supervisors have reported an increase in the number of action plans they have issued to supervised businesses, suggesting an increased emphasis on educating businesses on how to meet their AML/CTF obligations. There has also been an observable increase in the number of desk-based reviews and supervisory visits undertaken since the previous reporting period, and the responses from supervisors suggest that there has been a general increase in enforcement action compared to 2013/2014.
Second, HMT indicate that supervisors, regulators, government, law enforcement and regulated businesses must work together much more effectively. This means banning “siloism” between and within these groups; willingly sharing intelligence, skills, knowledge and experience; and collectively seeing well-designed projects and initiatives through to successful completion.
Third, there is still progress to be made in implementing a fully risk-based approach consistently across the board. Whilst HMT acknowledge that there have been signs of progress with some supervisors refining their monitoring processes, an area of inconsistency between supervisors is in the identification and assessment of risk, and the level of sophistication of risk-modelling by supervisors varies significantly. A risk-based approach means not targeting an entire class of customers in a blanket manner but rather proportionately applying AML measures on a case-by-case basis. As part of the on-going review of the supervisory regime, the government will continue to examine how the issue of non-comparable risk assessment methodologies can be addressed.
HMT welcomes public feedback on the report.