Beyond the provocative headline “SRA stripped…”, which evokes the dramatic image of an army officer being relieved of duty, epaulets torn off and authority handed over, this shift in AML oversight to the Financial Conduct Authority invites reflection. It also makes room for a timely reminder from Winston Churchill: “However beautiful the strategy, you should occasionally look at the results.”
The relationship between the SRA and HM Treasury has not been smooth. AML is law and unwaveringly here to stay; that’s the opinion and immovable position of HMT and standards, processes, and conduct of regulators seem to have also been in HMT’s mind’s eye.
The SRA, through its implementation and own interpretational touches, devised a very heavy-handed approach to compliance, handing down fines as damaging as Thor’s hammer. I get it, make examples, rule with fear, whip the sector into shape, it all sounds very spare the rod, spoil the child, and that’s the problem, when viewed in contrast to the FCA’s OPBAS, which stands for the Office for Professional Body Anti-Money Laundering Supervision, and its approach.
We read, almost weekly, about the SRA whipping out 5 and 6-figure fines for AML issues, and the FCA found 36% of all financial services firms had compliance issues. I think the difference between the two regulators is that the FCA acknowledged firms had operational issues dealing with compliance and assisted, while the SRA took a more demi-god approach.
The SRA interpretation hasn’t really worked, it’s not ticked all the boxes other than its bottom line income column, and the somewhat sour grapes missive of “be careful of what you wish for, the FCA has no history of legal services compliance”, also misses the point of the switch. This isn’t about professions or professional courtesy; it’s about money.
To borrow Tolkien’s idiom, “out of the frying pan and into the fire,” this transition could feel that way on some levels, though not all. The notion of “One Ring to rule them all” may yet come to pass, as a super City-esque regulator begins to take shape. The emerging approach will be framework-based and data-led. Anyone with a touchpoint in the financial transaction journey may find themselves part of a cradle-to-grave oversight system spanning multiple professions. A fellowship of sorts, with all oars rowing in the same direction.
This shift could increase the cost of doing business. The FCA may impose additional fees, and parallels can easily be drawn with the compliance and regulatory costs associated with Open Banking licences. Similar regulatory frameworks are already being considered for smart data usage. A multi-regulator structure may not sound appealing, but let’s be honest, the legislation governing economic crime resembles crazy paving: uneven, improvised, and constantly shifting. However, it remains fluid. We can expect ongoing nips and tucks, streamlining, and consolidation until a best-fit model emerges. And even then, it will continue to evolve.
In today’s compliance world, this is the cost of doing business, and as Arthur Miller once penned, “Don’t be seduced into thinking that that which does not make a profit is without value.” No amount of faux outrage of a regulatory switch will stem the changing tide. This is just keeping you in the game.
Christian Lister is Operations Director at X-Press Legal Services
