What we have seen during the last year is the tough defensive actions being taken by the government to implement and enforce its strategies to ramp up the fight against the ever increasing threat of cybercrime. We have all heard about the success of cryptocurrencies such as Bitcoin; the devastating effects on businesses due to ransomware attacks by viruses such as ‘Lockey’ and ‘Wannacry’; but also how the Internet is helping to facilitate terrorist financing on a larger, faster scale. It is estimated that serious organised crime costs the UK at least £24 billion a year.
One area of concern is the efficiency of Professional Body Supervisors (PBSs). The role of a PBS authority is to ensure that firms, in particular law firms and accountancy practices, are correctly adhering to AML guidelines. One example is the Solicitors Regulation Authority which is a body dedicated to monitoring law firms. These organisations (PBSs) oversee, assess, support, and advise lawyers and accountants to ensure that they have sufficient systems in place to monitor and assess the risk of potential terrorist financing and money laundering through the actions of their clients. PBSs monitor compliance and report any concerns to the Serious Organised Crime Agency. However, due to the amount of professional supervisors in operation, with many overlapping in their areas of advice and expertise, together with a plethora of guidelines and little information sharing taking place between bodies and law enforcement agencies. It is considered that the current regime of supervision is inconsistent, potentially allowing for gaps in risk assessment and security.
With growing concerns that criminals and terrorists may be attempting to exploit these loopholes, the Economic Secretary to the Treasury, Mr Simon Kirby stated:
“This government has already done more than any previous government to tackle the threat of money laundering and terrorist financing, including setting up the Panama Papers Task force … and recovering a record £255 million from criminals in 2015/16. The UK is a world-leader in the fight against corruption, money laundering and terrorist financing. But more can be done…”
As such, in January 2018 the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), which will sit under the Financial Conduct Authority (FCA), has been created to oversee and coordinate the UK’s existing twenty two accountancy and legal body AML supervisors. This new professional watchdog has been designed to complement the updated Money Laundering and Terrorist Financing Regulations 2017 to bring the UK’s anti-money laundering and terrorism financing regimes in line with international standards. They will assess the supervisors’ current procedures to search for potential weaknesses in the AML system, make recommendations, ensure the professional bodies follow their advice, and consider and enforce penalties for non-compliance. The government consider that these professional bodies bring ‘substantial benefits to the AML regime’, but weaknesses and inconsistencies are an open door for organised crime groups. As such, by setting new robust standards with in-depth investigations and continuous reviews, the aim is to drive up standards and build a credible deterrent to money laundering and terrorist financing.
There are three main areas that the OPBAS want these supervising authorities to concentrate on:
- To develop a sound understanding of the workings of the different bodies and sectors they supervise.
- To adopt a risk-based approach that concentrates its supervisory resources where the risk is greatest.
- To liaise with other bodies who oversee these professions to share good practices and avoid supervisory conflicts.
PBSs will be encouraged to review the advice they are giving to organisations and consider whether similar advice may be being given by other bodies, thereby causing conflicts of interest and confusion as to what is the best approach to adopt. Whilst many supervisors are very effective in their specialist areas, there is room for improvement and a more risk based approach would be far more advantageous, especially where there is an overlap in supervision. For example the Solicitor’s Regulation Authority and the Law Society are two bodies that regulate the legal system – but the question is whether their advice on particular issues is consistent. With more frequent information sharing between bodies and a combined approach to risk assessment, the aim is to create a more defined, understandable set of guidelines and advice which can be easily interpreted and monitored across those industry sectors that are most at risk of being effected by money laundering and terrorist financing activities.
It is more or less certain that one particular area likely to be reviewed and investigated by the OPBAS is what the current regimes and procedures are for customer due diligence checks. For all law and accountancy firms, the ‘know your client’ procedure must be thorough, as this could be the avenue that brings to light illegal activity on the part of their client. With OPBAS taking a risk based approach to reviewing the AML regime, it would not be surprising if the requirement for more thorough client due diligence checks becomes a more obligatory, in-depth process for all ‘at risk’ firms.
If you consider that your business may be affected by new obligatory requirements relating to due diligence checks, then Proximal Consulting can assist. We have been providing financial institutions and law firms with our specialist enhanced due diligence reports for almost twenty years and such reports will confirm whether a customer or partner, (prospective or existing), is providing you with complete and accurate information. Our detailed research will uncover any existence of criminal activity such as money laundering, corruption, terrorist financing or fraud.
We have developed advanced methodologies and extensive investigative tools to enable us to obtain critical and relevant intelligence on companies and individuals in these jurisdictions. We also work with long-term and reliable associates who provide us with detailed in-country local intelligence.
In terms of our investigations and reports, we seek to confirm the following information in respect of individuals:
- Address verification
- Confirmation of personal details such as name, date of birth and place of birth
- Background information on the family of the subject of our report
- Full details of business interests
- Whether the subject should be viewed as a politically exposed person (PEP) and/or a close family member or associate of a PEP
- Media references
- Intelligence about confirmed or suspected links to criminal activities
- Details about any allegations or verified intelligence about involvement in corrupt activities
- Sanctions risks
Client confidentiality is of the utmost importance to us, and all of our enhanced due diligence checks are conducted in a totally discreet manner.
Our enhanced due diligence reports on individuals and corporate entities will not only ensure that the legal and regulatory obligations of our clients have been met, but they are also designed to safeguard our clients from any financial, legal, operational or reputational risks. All our enhanced due diligence reports are tailor-made to our clients’ requirements at a fixed price and within an agreed time frame.
For further information, please see our full site: www.proximalconsulting.com