AML policies, controls and procedures: ask the…
The SRA has warned of the risks posed by “off-the-shelf” policies, controls and procedures (PCPs). Emma Williams sets out what questions to ask to get your PCPs right first time.
A 2022 HM Treasury review of the UK’s AML and counter-terrorist financing (CTF) supervisory regime identified challenges with its effectiveness.
The government identified four potential models for supervisory reform:
The consultation also looked at proposals for ensuring an effective sanctions regime.
Reforming the supervisory regime will play an important role in achieving an effective AML regime, but it will only go so far without addressing the Money Laundering Regulations 2017 (MLRs).
A significant proportion of the MLRs are relevant to the financial sector. Consequently, the MLRs are onerous and difficult to put into practice across the legal profession.
We support the PBS consolidation model for England and Wales.
This has the potential to simplify the complex regulatory landscape, making it easier to navigate and brining more consistent levels of supervision.
This model also supports the preservation of the independence of the legal profession.
Giving OPBAS additional powers is unlikely to address the ongoing failings of the current supervisory regime, particularly around fragmentation and lack of consistency.
There must be a greater focus on the overall effectiveness of the regime and outcomes, rather than tick-box compliance to satisfy overly prescriptive requirements.
The legal sector plays an important role in ensuring an effective sanctions regime, both in providing advice to clients on their compliance with the regime, and in ensuring that lawyers work in accordance with sanctions.
We are not aware of any evidence of any failings across the legal profession in sanctions compliance.
As such, there is no justification to increase the role of AML/CTF supervisors in monitoring firms’ sanctions controls and finance.
Law firms should consider their own risk appetite and how to address their sanctions risk, which could be extremely limited.
Law Society president Nick Emmerson said: “The AML regime is highly complex and it is vital for representative bodies, such as the Law Society, to be able to help draft and contribute to legal sector-wide guidance.
“We are concerned that in the current proposals, legal sector-specific expertise could be lost – meaning the AML supervisory regime would be less, rather than more, effective in the short-to-medium term.”
The consultation closed on 30 September 2023.
The upcoming consultation on the MLRs 2017 will provide an opportunity to address some of the challenges with AML obligations.
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