It set out its proposal to bring lawyers and accountants under FCA supervision in its ‘Anti-money laundering/counter terrorist-financing (AML/CTF) supervision reform: duties, powers, and accountability’ consultation, which closed in December.
Responding to the consultation last week, the treasury said opponents, who were ‘mainly from the legal sector’, had argued the switch was ‘unnecessary, duplicative, and incompatible with existing regulatory frameworks.
‘Many noted that solicitors, barristers and other legal professionals already undergo rigorous statutory fitness and propriety assessments, and warned that a parallel FCA administered test would add cost and friction without providing additional AML benefit. Concerns were also raised that FCA testing could interfere with the independence of legal regulators or contradict their decisions, leading to uncertainty over who has primacy in assessing professional suitability,’ it said.
However, treasury minister Rachel Blake, writing in the foreword, said the government’s approach was to ‘build on existing powers where they are sufficient... while aiming to ensure that any new powers are proportionate and do not create extra burdens on firms’.
The treasury response stated: ‘To support a smooth transition, the government expects the FCA to be able to make use of existing checks where appropriate and to operate processes that avoid unnecessary duplication.’ It assured legal and accountancy sectors would not be brought within scope of reg 58, which covers integrity, competence and compliance history, prior to transition, to avoid ‘multiple sequential changes’.
Lawyers had also sought clarity on the FCA’s information gathering and inspection powers. The treasury said the FCA would not be able to require disclosure ‘of any document which attracts legal professional privilege’. However, it was ‘essential’ to have ‘clear understanding’ about what documentation might be required during a supervisory visit and how privileged information should be redacted from files. Accordingly, the FCA will put guidance in place to ensure clarity.
The treasury warned the FCA would be prepared to go through the courts to prevent any abuse of privilege by criminally complicit or wilfully negligent legal professionals.
