It’s time to address the failings in money laundering supervision, not create more inconsistencies

 
David Stevens
London's Economic Boom Continues
Source: Getty

The UK is famous for being one of the most powerful financial centres in the world.

But this status also attracts criminals, who try to exploit the system through fraudulent activity and money laundering. While there are procedures in place to prevent this kind of activity, there are also failings which urgently need to be addressed.

At the moment, 25 organisations supervise those companies most at risk of being used in money laundering schemes, which largely include accountancy and legal services providers.

Other sectors, including high value dealers and money service businesses, are currently regulated by HMRC, which is severely under-resourced.

Earlier this year, the economic secretary to the Treasury, Simon Kirby, announced plans for a new watchdog: the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), which will exclude those companies supervised by HMRC.

This is staggering, and creates even less consistency in anti-money laundering supervision.

The government should use their powers to match the private sector effort, providing consistency across all anti-money-laundering bodies.

Serious and organised crime costs the UK an estimated £24bn every year, and government needs to be stricter on itself to reduce this figure.

In its recent report, Transparency International UK found hundreds of UK-registered shell companies at the heart of scandals amounting to £80bn. And yet there are just six staff in Companies House who are responsible with policing four million companies.

As the government’s official registrar, it is effectively an unregulated company service provider, exempt from rules that require checks on those registering a company.

This means that the UK is at risk of illicit financial flows as a result of the government’s own processes.

So while regulation in the private sector is being ramped up, with accountants and other service providers required by law to carry out checks, there is a “no questions asked” approach for those going to Companies House directly.

A reformed regime could fill this due diligence gap and remove the need for the extensive duplication of cost and effort elsewhere.

The final area where reform is needed is in relation to Suspicious Activity Reports (SARs).

Businesses which comply with Money Laundering Regulation need to inform the National Crime Agency (NCA) of suspicious activity through SARs.

However, intelligence-sharing from the NCA has historically been limited to the banking sector.

Sharing intelligence on schemes and crimes relevant to a business’ type and location would go a long way towards helping professionals identify suspicious activity.

Progress is being made, but we must formalise information sharing to increase the quality and usefulness of SARs.

The Home Secretary has announced that a National Economic Crime Centre is to be established, which is encouraging. But it will be interesting to see whether this bold announcement translates into additional resources – or even just more efficient use of existing ones.

We cannot risk the UK’s reputation as a financial centre. Financial crime costs our country billions and harms our businesses, so there is real value in creating a true partnership between the private and public sectors to help tackle the risks of financial crime.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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