Government says it will minimise duplication as firms face new register, fit-and-proper checks and future fee consultation
In a consultation response published by HM Treasury, the government has confirmed that the Financial Conduct Authority will take over anti-money laundering and counter-terrorist financing supervision of professional services firms.
The government has confirmed plans for the FCA to take over AML/CTF supervision of legal service providers, accountancy service providers and trust and company service providers as part of a forthcoming legislative reform programme.
Fit-and-proper requirements will also be extended across legal and accountancy service providers. The test will allow supervisors to assess the integrity, competence and compliance history of firms and their beneficial owners, officers and managers.
Some respondents warned that FCA fit-and-proper testing could interfere with the independence of legal regulators or contradict their decisions, creating uncertainty over which regulator would have primacy in assessing professional suitability.
Treasury said the FCA should be able to use existing checks where appropriate during the transition and operate processes that avoid unnecessary duplication. It said the effectiveness of the fit-and-proper regime would depend on timely and reliable intelligence from existing professional body supervisors.
The response added: “HM Treasury is conscious of the risk of duplication of requirements on firms as a result of supervision reform. We will ensure that the FCA and existing PBSs have the means to share information and cooperate effectively to minimise burdens.”
The FCA will apply a risk-based approach to supervision and will be able to use information requests, inspections and thematic engagement. It will also be given powers to appoint skilled persons and issue directions to firms, subject to statutory safeguards.
Responsibility for issuing and approving AML/CTF guidance for professional services firms will transfer to the FCA. Treasury will retain limited oversight to ensure guidance remains aligned with the policy intent of the Money Laundering Regulations, while industry input will continue to inform guidance.
Under the proposed framework, the FCA would be able to exercise enforcement powers available under the Money Laundering Regulations, including financial penalties, public censure, senior manager prohibitions and criminal proceedings in serious cases.
For lower-level or routine breaches, the government accepted that the existing enforcement process could be disproportionate. It said it would consult further on a more streamlined process for minor fines, with clear limits and safeguards.
The new model will be funded through charges on supervised firms. Treasury said the FCA’s AML/CTF supervisory activities would be funded on a full cost-recovery basis, with the detailed fee structure to be determined through a future consultation.
Respondents raised concerns that FCA fees could duplicate existing professional body charges and the Economic Crime Levy, increasing costs for firms. Treasury said the funding model should remain proportionate and fair, particularly for smaller firms and sole practitioners.
No commencement date has been set in the response. The government said implementation will require primary legislation through the Financial Services Bill and secondary legislation amending the Money Laundering Regulations during the FCA’s implementation period.
Treasury said it would continue working with the FCA, HMRC, professional body supervisors, regulators, representative bodies and civil society on transition and implementation plans.