HMT consults on reform of UK's AML/CTF supervisory regime for professional services firms

HM Treasury (HMT) has published a consultation on proposals to reform the UK's anti-money laundering and counter-terrorist financing (AML/CTF) supervisory regime for professional services firms. This follows the October consultation response and policy statement confirming that the UK Financial Conduct Authority (FCA) will be the sole AML supervisor for legal, accountancy and trust and company service providers under the Money Laundering Regulations 2017 (MLRs). The consultation sets out the FCA's proposed key duties, powers and accountability mechanisms that the FCA will need for supervising professional services firms under the MLRs, along with the legislative changes needed to implement these reforms. While many proposals involve extending existing MLR provisions to the FCA in its new expanded role, HMT is also considering whether further enhancements are necessary to the MLRs to ensure the FCA has a comprehensive supervisory toolkit.

Key proposals include the following as set out below.

• Empowering the FCA to register all in-scope firms, with powers to accept, deny, suspend or cancel registrations. Minor amendments are proposed to harmonise gatekeeping functions under the MLRs.
• Empowering the FCA to identify and bring unregistered firms within scope of the MLRs and under its supervision. A public register is also being considered to improve transparency and deter misconduct.
• Applying consistent risk profiling and targeted reviews across each sector, supported by inspections and data-sharing with authorities.
• Adding limited new powers, allowing the FCA to issue directions to firms or to require a firm to appoint a skilled person to conduct a review.
• Ensuring firms are provided with up-to-date information on AML/CTF risks and effective compliance with the MLRs, including through guidance.
• Allowing the FCA to carry out intelligence-sharing with law enforcement, other supervisors and authorities as appropriate and support whistleblowing. HMT is also consulting on an amendment to improve the sharing of Suspicious Activity Reports between supervisors and the National Crime Agency.
• Providing the FCA with the power to impose civil and criminal penalties and public censures for MLR breaches in line with existing FCA powers, with appropriate judicial oversight.
• The FCA funding its supervisory activities through cost-recovery fees charged to supervised firms, consistent with its current approach.
• Seeking views on legislative provisions to ensure the reforms do not impose unnecessary burdens on firms.
• Confirming that the FCA will remain operationally independent from HMT and political influence, while remaining accountable to both HMT and Parliament.

The deadline for responses is 24 December, with HMT welcoming suggestions for any additional powers or safeguards. The full list of consultation questions is available in Annex C to the consultation.

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