AML supervision review looks forward to change

Treasury has published its 2022-23 review of AML supervision. The report contains the normal review of what each supervisor has done, but mainly looks forward to the upcoming changes to both the supervisory structure and the MLRs. Treasury says the supervisory reform is still a priority but has no timetable for the next steps. Meanwhile, it is implementing a framework of enhanced data requests to allow it better to measure how effective supervision is. The framework looks at educational activity, risk-based approach, risk-based enforcement and effectiveness of supervisory interventions. It will use the framework as part of the next annual assessment. Other initiatives include preparing for the next FATF mutual evaluation (which will place more emphasis on effectiveness than previous rounds have done), updating the NRAs and looking at the role of supervision in sanctions compliance.

The body of the report notes significant variation in supervisory approaches, with HMRC in particular renewing its focus on onside visits. Key observations included:

• overall, around 10% of firms are considered to be high-risk;
• the FCA has over 50 full time financial crime specialists;
• the FCA has implemented a data led approach, including REP-CRIM and tools that identify outliers;
• the FCA has developed a “modular assessment proactive programme” in which it reviews multiple firms’ financial crime systems and controls in relation to a specific risk;
• of the firms subject to an FCA desk based review, 45% were compliant and only 4% non-compliant (although 38% of the reviews were not complete as at the report date);
• the Gambling Commission supervised 263 firms, many of which are remote casinos with non-UK ownership. It published 19 cases of AML failings during the period;
• HMRC supervised over 35,000 firms, of which accountancy service providers and estate agency businesses comprised over 30,000. During the period around 5% of its supervised population underwent some form of review, and assessed non-compliance in 28% of cases; and
• the Professional Bodies found just under 20% non-compliance resulting from their reviews, but supervisory activity was not consistent across bodies.