Risk assessment remains a concern
The Anti-Money Laundering Supervision and Monitoring Report for 2023/24 found increased compliance rates across a raft of key areas, as well as some room for improvement in risk assessments and reporting suspicious activity.
The showed some firms struggled with documenting the potential risks posed by their client base. And more than three-quarters (78 per cent) of non-compliant firms did not maintain an up-to-date written firm-wide risk assessment, an increase from 63 per cent in 2022/23. Many firms used unmodified templates from third parties that had not been tailored to their specific circumstances.
However, client risk assessments showed signs of improvement. Some 83 per cent of non-compliant firms either lacked written assessments or had inadequate ones, down from 95 per cent in the previous year.
There was also an upturn in training and documentation. While 67 per cent of non-compliant firms were unable to prove they had provided sufficient AML training to relevant employees, this was down from 79 per cent in 2022/23. This included sole practitioners and money laundering reporting officers.
There has also been a significant reduction in firms failing to obtain criminal record certificates for beneficial owners, officers or managers, dropping from 55 per cent to 28 per cent of non-compliant firms.
The report revealed that of 123 reviews undertaken during 2023/24, less than a third (29 per cent) needed to provide evidence of remedying non-compliant issues, up from 26 per cent in the previous year.
Other key findings from the Anti-Money Laundering Supervision and Monitoring Report for 2023/24 include:
- The IFA supervised 1,815 firms as at 5 April 2024.
- Of these supervised businesses, 60 per cent were classified as low-risk, 26 per cent as medium-risk and 14 per cent as high-risk firms. Some 80 per cent of them are sole practitioners.
- During the reporting period, the IFA conducted 123 monitoring reviews, with 71 per cent of firms demonstrating full or general compliance with money laundering regulations, compared to 74 per cent in 2022/23.
- The body issued £24,579 in financial penalties for regulatory breaches, down from £26,000 in the previous year.
- Eighty-two supervised firms submitted 211 Suspicious Activity Reports to the National Crime Agency, up from 77 firms submitting 216 SARs in 2022/23.
- Nearly two-thirds of IFA member firms provide or intend to provide trust or company formation services, an area highlighted as high-risk in the National Risk Assessment 2020. The IFA has updated its annual firm returns to gather more detailed information about these services and their associated risks.
Risk profile determines monitoring approach
The IFA has enhanced its supervisory approach through a hybrid model of onsite and desk-based reviews, with targeted assessments based on risk profiles. High-risk firms are reviewed every three years, medium-risk every five years, and low-risk firms every decade. Information taken from annual firm returns and previous reviews suggest high risk factors such as high risk clients, services provided or geographical locations. This information is used to generate risk profiles of all IFA supervised firms.
Julie Williams, IFA Board Chair, reinforced the organisation’s investment in IT infrastructure and professional standards to maintain robust supervision while supporting members amid uncertain economic conditions.This reflects the sector’s ongoing vigilance against potential money laundering activities, estimated to be worth up to £100 billion in criminal profits annually in the UK.
“During periods of uncertain economic conditions for business and individuals, our members in practice are increasingly relied upon as trusted business advisors in an ever-changing regulatory landscape,” she said.
“The IPA Group investment in IT infrastructure, coupled with the restructuring of the Professional Standards department, demonstrates our continued commitment to helping supervised firms maintain compliance with the money laundering regulations and tackle economic crime.”
IFA helps members with training, templates and compliance support
The support provided during and after AML reviews has seen a reduction in the number of referrals to the disciplinary process resulting in one membership removal and £24,579 in total fines issued, compared to three removals and £26,000 in fines during 2022/23.
The IFA has responded to these challenges by implementing several initiatives, including:
- Launching AML Matters workshops, attracting over 40 delegates per session.
- Developing new templates to assist smaller practitioners.
- Creating an online member engagement platform.
- Enhancing IT systems for improved monitoring and data analysis.
- Restructuring the Professional Standards team to integrate compliance functions.
The IFA is strengthening its supervisory approach through:
- Enhanced collaboration with law enforcement agencies.
- Improved information sharing with other professional bodies.
- Development of new website content focusing on risk-based approaches.
Access the Anti-Money Laundering Supervision and Monitoring Report for 2023/24 HERE.
