On 8 July 2019, HM Treasury published its latest anti-money laundering and counter-terrorist financing (AML / CTF) supervision report for 2017-2018. The report incorporates activity undertaken during this period which supervisors provided to HM Treasury in their annual returns and takes into account observations from the Financial Action Task Force’s (FATF) mutual evaluation report of the UK’s AML / CTF regime. Additionally, the report confirms the intention to transpose the Fifth Money Laundering Directive into UK law by January 2020.
The report highlights the following key findings and recommended actions:
- there are inconsistencies in the quality of supervision among the UK’s AML / CTF supervisors. While the statutory supervisors (FCA, HMRC and the Gambling Commission) have a strong understanding of money laundering and terrorist financing risks, the UK needs to sustain its efforts in addressing the significant deficiencies in supervision of its other professional bodies through:
- ensuring consistency in AML / CTF risk understanding;
- taking a risk-based approach to supervision; and
- ensuring that effective and dissuasive sanctions apply;
- there are significant weaknesses in the risk-based approach to supervision among all supervisors, with the exception of the Gambling Commission;
- there has been an increasing trend in the levying of penalties for serious systemic AML / CTF failings;
- efforts have been made to address weaknesses in supervision and sanctions of the accountancy and legal sectors, although these failings continue to have an impact on the preventive measures applied and the quality of financial intelligence gathered;
- supervisors should routinely collect statistics and feedback on the impact of supervisory actions to enable them to better target their activities and demonstrate the impact of their supervision;
- the FCA should follow the practice of other statutory supervisors by considering the wider use of criminal background checks as part of its processes to ensure criminals and their associates are prevented from owning or controlling financial institutions; and
- plans to extend AML / CTF requirements and related supervision to virtual currency exchange providers should continue to progress.