The effectiveness of supervision to prevent money laundering and terrorist financing has never been so important. The range of threats the UK and other countries face continues to grow. These are driven by the use of new technologies designed for illicit purposes and a range of actors who engage in illicit activity, including money laundering, terrorist financing, circumvention of sanctions and tax evasion.
Many countries, including the UK, now have a high level of technical compliance with the global standards, set by the Financial Action Task Force (FATF). The focus now needs to shift to ensuring the investment made by governments, supervisors and businesses is used effectively to prevent, detect and disrupt these threats. Supervisors and businesses must work together to ensure resources are focused on the small percentage of transactions that present the highest risk and not on the majority of transactions, which are likely to be quite legitimate. This riskbased approach has now been further embedded by the FATF into the revised and strengthened global standards.
Businesses should feel confident to use their risk analysis skills to make informed judgments about where risks lie and what action they should take to mitigate them. Supervisors should support businesses in this.
Equally, businesses should expect robust supervision and severe penalties, where appropriate, from law enforcement agencies if found to have failed to consider and act on the risks they face in business. The consequences of such failures have included the significant reputational damage rightly suffered by firms as a result of enforcement action. Not only do such failures impact upon those firms, they reflect badly on the reputation of London as a financial centre. The impact on the City and the UK from such failures, in addition to other recent scandals, should not be underestimated. It is vital that supervisors and businesses work together to
protect the reputation, integrity and competitiveness of the UK.
HM Treasury will maintain a focus on the effectiveness of supervision, in particular, for improving transparency and accountability. We will do this by continuing to work closely with the full range of supervisors, including Government departments and professional bodies.
Link to the detailed report: click here