Evolution, not revolution, is needed to tackle economic crime

According to UK Treasury data from 2020, Serious and Organised Crime costs the UK approximately £37bn per year. Much of this is economic crime, including money laundering.

On 30th June this year, the Government launched a two-month consultation offering input on four separate proposals to reform anti-money laundering (AML) supervision over the accounting and legal sectors.

Currently, AML supervision of accountancy is conducted by professional bodies and the statutory supervisor, HMRC. The activities of the Professional Body Supervisors (PBS) are overseen by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). While it has not always been smooth sailing, this structure has seen noticeable improvement in recent years and has given firms more clarity and certainty over how they are supervised.

The Treasury’s four proposed models

One of the government’s proposed models is to strengthen OPBAS (so-called ‘OPBAS+’) by giving it more powers to hold PBS’ more accountable and raise standards of supervision. However, the other three models proposed in the consultation would see a complete upheaval of the current system, risking the progress made thus far.

They range from phasing out OPBAS and potentially having just one consolidated PBS for the whole accountancy sector, to removing all AML supervisors across all sectors (not just accountancy and legal) and replacing it with a new public sector regulator.

The potential ramifications from these proposals are major and present a huge risk to tackling economic crime and UK productivity. The transition alone from moving supervision of accountancy firms from 13 professional bodies to a single supervisor is fraught with risk and could see genuine cases of economic crime fall through the cracks.

In the case of a consolidated PBS, it is unclear whether there is any appetite from professional bodies to take on this enormous role. If that PBS was to fail, there would also be very little capacity elsewhere to cover its work.

Even after the transition to one of these models, there remains significant doubt as to whether a single body (private or public) would have the capacity and expertise to effectively supervise the accountancy profession which is so varied – not only in size but also in the sectors and services they provide. AAT has over 120,000 members supporting 500,000 small to medium-sized businesses across the UK.

Like many other accountancy and bookkeeping firms, they would undoubtedly face greater administrative burdens and costs, along with significant uncertainty, with the sort of wholesale reform these proposals require.

A disproportionate solution?

The crux of this issue is determining whether the reform is proportionate to the problem it is trying to solve. Money laundering is a hugely important problem that we must do more to tackle, but like any crime. it can thrive when supervision and oversight falters.

The UK government’s own consultation acknowledges that compliance with the technical requirements of the Money Laundering Regulations has significantly improved since OPBAS was created in 2018, but that the consistency of supervision still requires improvement.

AAT does not dispute this, but it does not justify upturning the entire system and starting again to address this problem. Instead, we see the evolution of the current system through the OPBAS+ model as a more effective, low risk, and more resilient solution for the foreseeable future. This reform would have no transition risk, retain the capacity and expertise needed to supervise the diverse accountancy profession, and crucially, not simply carry on with the status quo.

If OPBAS was given powers to to remove poor performing PBS’ and provide more robust oversight, more consistent supervision and improvements in tackling economic crime would be evident.

With the consultation due to close at the end of September, I would encourage the whole profession to respond to it and ensure MPs and the government fully understand the importance of this issue. No one is arguing for the system to stand still, but the government needs to hear from firms and experts to realise that reform to AML supervision must be done in a way that provides certainty for business and is proportionate. The risks are simply far too great to do otherwise.