Accountancy Sector Braces for Surge of Post-Brexit AML Regulation

  • Security , Compliance
  • 27.05.2021 12:10 pm

Three quarters (76%) of compliance professionals in the accounting sector expect to see more anti-money laundering (AML) regulation as a result of the UK’s exit from the European Union, according to new research released today by LexisNexis® Risk Solutions, the global data and analytics provider.

These findings are based on a survey over 875 compliance professionals across the real estate, banking, accountancy, lending, wealth management and legal sectors, and seek to showcase how businesses are coping with the current AML framework. 

This extra regulatory burden would come at a time when compliance professionals are already showing signs of struggling to comply with current AML regulations, including the Fifth Money Laundering Directive (5MLD) that came into force in January 2020. Research shows the accountancy sector is on average only 60% of the way towards reaching compliance with 5MLD, despite having had over 12 months to do so. This leaves the sector exposed to money laundering breaches, regulatory fines and reputational damages – all of which should be avoided.

Tellingly, over three quarters (79%) of compliance professionals across the seven sectors surveyed believe that a regulatory clampdown is coming within the next 12 months, with almost half thinking it could be within 6 months.

In anticipation of potential further post-Brexit regulatory commitments, the Accountancy sector has unanimously called on the regulator for further guidance in implementing effective AML programmes, with 87% of compliance professionals in the industry agreeing that the regulator should provide better guidance.

The absence of clear guidance from the regulator may also explain the accountancy sector’s lack of faith in 5MLD, compared to other regulated sectors. Almost half (43%) said they expected the Directive to have no impact on their ability to prevent and detect financial crime, notably higher than the third (32%) of respondents across other sectors who felt the same.

Nina Kerkez, Director of UK&I Consulting at LexisNexis® Risk Solutions, comments:

The regulatory burden of AML compliance, including the requirements of 5MLD, is hugely challenging for all industries, but it appears that compliance professionals in the accountancy industry feel like they’ve been cast adrift by the regulator at a critical time in proceedings.

The industry’s fraught progress with 5MLD appears symptomatic of a lack of guidance from the regulator on the correct way to implement the requirements, as well as perhaps a general feeling of being overwhelmed by the sheer extent and complexity of what is now expected in terms of the forensic levels of investigation required by a risk-based approach to AML. It seems what’s needed is a strong regulatory / industry collaborative partnership, where all regulatory and supervisory bodies can work closely together to resolve these educational gaps and make better progress towards their AML implementation. And if firms’ predictions about the post-Brexit regulatory clampdown prove accurate, this needs to happen sooner rather than later.

With such a high number of Accountancy compliance professionals showing scepticism for the impact 5MLD will have on financial crime detection, the regulator also appears to have some influencing work to do to better demonstrate the tangible benefits of 5MLD, if they want to see better progress being made towards implementation.

Additionally, regulatory bodies could do more to advise firms on how investment in technology can further the fight in prevention of financial crime. By automating and streamlining customer due diligence and investigations processes, for example, they would free up the time of skilled professionals to focus on robust risk-based activities that will really make a difference. Technology can not only better equip firms to mitigate the risks facing them, it enables them to fulfil their duty to protect wider society.”

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