The UK has developed a comprehensive anti-money laundering (AML) and countering the financing of terrorism (CFT) supervisory regime. The AML/CFT regime seeks to regulate and supervise sectors and firms from money laundering and terrorist financing through a risk-based approach.
HM Treasury works closely with both statutory supervisors (the Financial Conduct Authority, His Majesty’s Revenue and Customs, and the Gambling Commission) and the 22 legal and accountancy Professional Body Supervisors (PBSs)1, as well as with the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), to deliver this. Success requires a balance between applying dissuasive sanctioning powers and ensuring that burdens on regulated firms are proportionate.
1.2 This is HM Treasury’s tenth report on AML and CFT supervision. Unlike previous supervision reports, this report will look at supervisory and enforcement data for both the 2020-2021 period (6th April 2020 – 5th April 2021) and the 2021-2022 period (6th April 2021 – 5th April 2022), rather than just data for a single year. The two years have been combined to address delays in reporting that developed during the pandemic. This report provides information on the performance of AML/CFT supervisors and fulfils HM Treasury’s obligation, under Section 51 of the Money Laundering Regulations (MLRs), to publish an annual report on supervisory activity through information requested from supervisors.
1.3 Each chapter of the report considers a specific area:
- Chapter 2 outlines the methodology HM Treasury used to develop this report
- Chapter 3 details the supervisory activities carried out by AML/CFT supervisors in the reporting period
- Chapter 4 considers supervisors’ promotion and enforcement of compliance with the AML/CFT standards among their supervised population
The role of supervision in a systematic approach to tackling economic crime
1.4 In December 2018, the Financial Action Task Force (FATF), the international standards-setter for AML/CFT, published its Mutual Evaluation Report (MER) of the United Kingdom2. The MER recognised that the UK’s AML/CFT regime is the strongest of over one hundred countries assessed by FATF and its regional bodies to date.
1.5 Whilst the UK achieved a high rating, the FATF assessed the UK’s supervision regime to be only moderately effective. Specifically, it found that there were significant weaknesses in the risk-based approach to supervision among all the UK AML/CFT supervisors, with the exception of the Gambling Commission. The MER also highlighted particular concerns surrounding the approach to supervision taken by the PBSs, which have formed the basis of OPBAS’s work over the past four years to drive improvements in this area.
1.6 In July 2019, the Government and the private sector published a landmark Economic Crime Plan3 which responds to FATF’s MER recommendations and commits the Government to a number of actions to enhance the AML/CFT regime, including:
- Conducting new National Risk Assessments on money laundering, terrorist financing, and proliferation financing
- Improving information-sharing between AML/CFT supervisors and law enforcement
- Transposing the Fifth Money Laundering Directive into UK law, bringing crypto asset providers, letting agents, and art dealers into the regulated sector
- Publishing post-implementation reviews of the MLRs and OPBAS regulations
- Introducing requirements to report discrepancies of beneficial ownership information
1.7 Building on the good progress made under the Plan, the Government has announced that a second Economic Crime Plan will be published to continue strengthening the UK’s approach to economic crime. This will further develop the Government’s overall strategy in this area and lay out a series of objectives and metrics against which the UK’s counter-economic crime regime can more easily be evaluated.
1.8 Whilst this report shows significant improvements in several areas of supervision over the reporting period, HM Treasury and AML/CFT supervisors remain committed to strengthening the UK’s approach to defending against money laundering. Close partnership-working will be central to efforts to enhance the proportionality and effectiveness of the AML/CFT regime.
December 21, 2022 Published by His Majesty’s Treasury UK Government. (Download the Report in PDF)