Examination of Witness

Part of Financial Services Bill – in a Public Bill Committee at 2:22 pm on 19th November 2020.

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Duncan Hames:

I certainly think we need to look at the area of supervision. This is a regulatory function. We have private sector supervisory bodies tasked with helping the business sector to put in place the necessary preventive measures to prevent money laundering.

While we welcome the introduction of the Office for Professional Body Anti-Money Laundering Supervision a couple of years ago, its reports—these are not activist or campaigner reports; these are Government regulatory reports—have been very damning of the effectiveness of the supervisory bodies. It is very fragmented—I think there are 14 supervisory bodies for the accountancy sector alone.

OPBAS has identified conflicts of interest between the advocacy and supervisory functions of those bodies. The effectiveness of their enforcement activity is really inadequate. If we take Her Majesty’s Revenue and Customs as one of the supervisory bodies, the fines imposed are barely a couple of thousand pounds and will quite possibly be less than the value of the commission or fee on any individual transaction. That is clearly an inadequate incentive for private sector actors to say no to handling illicit funds.

The quality of the money laundering defences in the private sector has also been found to be poor. The Solicitors Regulation Authority recently conducted reviews into about 60 companies. In nearly half of those cases, they are pursuing the findings they had for potential disciplinary action. A similar proportion of cases were found to be areas of weakness in money laundering defences in other sectors.

So we have a problem with supervision. The first line of defence against money laundering is tasked to the private sector, and yet the supervisory bodies that are meant to ensure that that is being done well, both in terms of guidance and in subsequent enforcement of regulations, are not effectively ensuring that those defences are good.

At the end of the day, the police estimate that the impact of money laundering on the UK economy is of the order of £100 billion a year. We can have lots of good measures and lots of good policies, which at times the Government will have been congratulated for, but the upshot is that we still have a big problem, which is not going away. That is why we think taking action where we can to improve the defences is urgent.