HMRC chief floats handing over its role as anti-money laundering supervisor
Serious overhaul of UK’s failing anti-money laundering defences needed 

11^th June 2018, London – News that HMRC’s executive have discussed ending the organisation’s role as the anti-money laundering (AML) supervisory body for a number of key sectors should prompt a wide-ranging and serious overhaul of the UK’s approach to AML supervision, according to Transparency International (TI).

Speaking to the Treasury Committee Inquiry on Wednesday, the HMRC Chief Executive told MPs that the organisation plans to discuss as part of next year’s government Spending Review whether others are better aligned to the task of overseeing firms in professional services, estate agency, high value dealers, and trust and company service provision. Transparency International has previously criticised the performance of HMRC as an AML supervisor, including the low value of fines it has levied for breaches, averaging at around £1000.

HMRC is the supervisor for estate agents, a sector Transparency International has highlighted as being particularly at risk of money laundering. TI research has found £4.4 billion worth of property across the UK considered to have been bought with suspicious money. This could just be the tip of the iceberg, across the UK 86,000 properties are owned through anonymous companies registered in secrecy havens, a common method used by corrupt individuals to hide their identities. Despite high levels of risk in the sector, just 0.12% of all reports to the police of suspicious activity in 2015/2016 had been identified by estate agents.

Any new AML supervisors of these businesses should:

• Ensure rogue businesses do not slip through the supervisory net. TI research has identified a number of professionals carrying out regulated activity outside the knowledge of money laundering supervisors like HMRC. These professionals face no scrutiny and therefore pose a major risk.
• Overcome conflicts of interest inherent in current arrangements. TI research has found 15 of the 22 supervisors we analysed acted as both trade bodies and regulators at the same time. This raises questions about how effectively they enforce sanctions against firms which breach regulations. Any supervisor taking over from HMRC should have an independent regulatory function.
• Improve the AML knowledge and risk awareness of the sectors they oversee. The diversity of money laundering risk across the various sectors requires supervisors with the capacity to help businesses identify and manage these risks.
• Commit sufficient resources. Impactful supervision requires genuine reach into business sectors, and a capacity to investigate shortcomings. Any new supervisor must be resourced to properly investigate money laundering cases.
• Bring transparency to credible and proportionate enforcement action. This is essential to improve awareness on the extent of money laundering breaches and enable public scrutiny. Where necessary, fines should be a meaningful deterrent to operating weak controls against money laundering.

Duncan Hames, Director of Policy at Transparency International UK, said: 

“We welcome HMRC’s open reflection on their role in preventing money laundering in the UK, and the priority they are able to give it. The National Crime Agency has observed there is a realistic possibility that hundreds of billions of pounds of money laundering impacts the UK every year. Our current defences have failed to curb the influx of dirty money, it must now be a clear priority for any organisation taking on that role.”

“Any review of the UK’s anti-money laundering supervision must be prepared to seriously overhaul what has been a weak line of defence. It’s absurd that in the property sector, where commissions on luxury homes can be in the tens of thousands of pounds, money laundering fines average just £1000.”

“Ministers have recently stepped up the rhetoric on cracking down on dirty money entering the UK. We have seen some important steps taken in law, now those who supervise the businesses and professionals on our first line of defence need to ensure they take effect in practice.”

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