The recently published HM Treasury Supervision Report (2024–25) offers an interesting insight and sets out a new direction for the UK’s anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) landscape.

 

The Financial Conduct Authority (“FCA”) is poised to become the single AML/CTF supervisor for professional services, replacing the current system of Professional Body Supervisors (“PBSs“) and the Office for Professional Body Anti-Money Laundering Supervision (“OPBAS“).

 

What is included in the new HM Treasury report?

 

The HM Treasury Supervision Report (2024–25) plays a crucial role in identifying emerging trends and providing a forecast of future regulatory developments.

 

The report confirms that the size of the regulated sector in the UK. 94,891 firms supervised across all sectors and c. 41,000 legal/accountancy businesses supervised by PBSs.

 

For the legal and accountancy sector, this is not just a regulatory reshuffle, it is a very determined signal of a move towards:

 

• greater consistency and accountability in supervision
• a data-driven, risk-based approach to compliance
• stricter enforcement and higher expectations for tailored AML compliance.

 

Predictions for the future look of the UK’s regulatory framework

 

• The FCA will supervise all legal, accountancy, and trust & company service providers for AML/CTF

That is not much of a prediction, it is pretty much hard wired to happen now unless we have a dramatic change of government. That said, the Supervision Report itself recognises that there is a lot of work to be done.

 

The implementation of this policy is subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan. As such, the date at which the FCA will commence supervision of the professional services sector will be heavily dependent on the availability of parliamentary time.

 

• There will be more amendments to the Money Laundering Regulations

The Government published details of proposed amendments to the MLRs earlier this year including: to close loopholes, clarify requirements and ensure customer due diligence is targeted at high-risk activity. These changes include measures to strengthen information-sharing and cooperation between supervisors and other public bodies involved in combatting economic crime, such as Companies House.

 

It is a safe bet that there will be further, iterative amendments made over time. Criminals don’t act in two dimensions or in a straight line so the law will need to continue to evolve to keep pace.

 

• We will see enhanced focus on “effectiveness” of compliance

Supervisors are now tracking persistent non-compliance, risk re-categorisation, and the quality of suspicious activity reports which are being submitted by regulated firms.

 

We are likely to see a further move away from simple “box tick” compliance to a world where the effectiveness of a firm’s AML and CTF procedures is judged more forensically.

 

Key points arising from the report

 

The trend for enforcement suggests an approach which favours increased scrutiny and exercise of the regulators’ powers.

 

• £59.5m in total fines issued (previous year £41.5m) in a total of 1,085 fines (previous year 1,227)
• FCA issued 5 fines totalling £49m
• HMRC issued 739 fines totalling £5m
• PBSs issued 338 fines totalling £2m

 

Persistent non-compliance is also under scrutiny. The report identifies 15% of non-compliant firms were also non-compliant at their last assessment.

 

Principal findings and recommended actions

 

1. Prepare for what is likely to be a more assertive, data-led scrutiny by the FCA.
2. Ensure the compliance framework is tailored to your firm. The report identifies generic AML policies as being insufficient and calls out a perceived lack of knowledge or understanding of the MLRs. Sector-specific understanding and application is critical.
3. Review and update your AML frameworks and ensure policies are tailored to your business model and risk profile of the firm.
4. Address persistent weaknesses. Supervisors are clearly tracking repeat non-compliance so firms must show real, sustained improvement.
5. Invest in training and technology. Supervisors are now leveraging analytics and artificial intelligence; firms will need to do the same to stay ahead.

 

For legal guidance and advice regarding Financial Law and compliance queries, please contact Fearghal O’Loan or a member of our Finance team for more information.

 

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.