Anti-money laundering monitoring results in £53m in fines
The latest Treasury figures on compliance with anti-money laundering rules shows that the total fines issued for breaching the rules was £53.2m in 2019/20, including penalties for professional service firms
However, the total value of fines has decreased from £121.8m in 2018-19 to a total of £53.2m in 2019/20.
In 2019-20, HMRC issued 31 fines, valued at £9m, compared to 131 fines in 2018-19, worth £1.2m.
Although HMRC’s overall enforcement action has reduced in number since the previous financial year, the average fine has risen to an average cost of £292,452, compared to £8,954 in 2018-19.
Along with its supervisory role, HMRC can also pursue prosecutions through its law enforcement powers under the money laundering rules, or the Proceeds of Crime Act 2002 (POCA) which covers money laundering offences.
Professional body supervisors (PBSs) conducted a total of 2,235 desk-based reviews (DBRs) and 1,980 onsite visits during the reporting period. This means that approximately 10% of the supervised population were subject to a DBR or an onsite visit, which is a slightly lower proportion than was reported in the period 2018-19.
Professional services remain attractive for criminals as a means of carrying out money laundering as they provide a means to create and operate corporate structures, invest, and transfer funds to disguise their origin, and lend layers of legitimacy to criminal operations.
Across the accountancy and legal sectors, PBSs reported that the most frequent breaches were: having no, or inadequate documented policies and procedures; inadequate CDD procedures including EDD/ Politically Exposed Persons (PEPs)); no, or inadequate, client risk assessment; no, or inadequate, AML training for staff; and no, or inadequate, firm-wide risk assessments. Several PBSs highlighted a common theme of a lack of understanding of the MLRs.
In the accountancy sector, PBSs reported that approximately 5% of the obliged entities were subject to a DBR and approximately 9% of these were classed as non-compliant with the MLRs.
The accountancy sector PBSs reported that 5% of their population were subject to onsite visit, with 19% of those visited classified as non-compliant.
Alongside DBRs and onsite visits, PBSs also carried out a range of supervisory activity including reviewing clients’ records for AML compliance through online systems and outreach work including educational emails, training, events, online webinars and tools, such as risk assessment templates or compliance software, published guidance and contact with support staff.
ICAEW as an accountancy supervisor has oversight of 10,846 firms that need to conform with AML rules and over the assessment period issued 60 formal actions following onsite visits. The institute issued £117,720 in fines, up from £55,907 in the previous year.
In conclusion, the Treasury said that the UK should continue its efforts to address the significant deficiencies in supervision by the 22 legal and accountancy sector supervisors through ensuring consistency in risk understanding; taking a risk-based approach to supervision; and ensuring that effective and dissuasive sanctions apply. The UK should closely monitor the impact of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) in undertaking this work.
It added that accountancy supervisors should continue to provide guidance and outreach to their members and seek to ensure the updates to guidance are provided in a timely manner.
It is also considering extending AML/CTF requirements and related supervision to virtual currency exchange providers.
As part of the Treasury’s wider work to strengthen the regime, it will conduct a review of the MLRs and OPBAS regulations by 26 June 2022, drawing on the outcome of consultation work over summer 2021 focusing on how to strengthen the rules.