Financial Services and Markets Bill [HL]

Baroness Hodge of Barking Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Baroness Hodge of Barking (Lab)]

My Lords, I thank the Minister for his excellent introduction to what is a complex and technical Bill. I will focus, as the Prime Minister’s Anti-Corruption Champion, on a part that may not be at the top of everyone’s agenda—it was not in the Minister’s top half. For those of us engaged in efforts to tackle the challenge of dirty money, it comprises an important and welcome proposal set out in Clause 14.

Tragically, over recent decades, Britain has become the destination of choice for too many wanting to hide or launder their dirty money. The National Crime Agency estimates that £100 billion is laundered into the UK annually. Academics estimate that, if you add this to the money lost through fraud, the cost of economic crime to the UK rises to £350 billion. That is more than five times what we spend on schools in England, or nearly six times the amount Britain currently spends on defence. It is huge and a loss that harms our economy, undermines trust in the integrity of the financial services sector, threatens our security and damages our public services.

However, the guilty criminals responsible for these crimes do not invent the schemes used to hide or launder their ill-gotten gains. They depend on the advice of professional enablers—accountants, lawyers, banks and company service providers—who devise the schemes and then enable, facilitate or collude with the economic crime. Most professionals work in both a lawful and an ethical manner but, sadly, there are some bad apples in the professions, who must be rooted out and punished. At present, the professionals are not adequately supervised and identified, and, too often, they are left free to pursue their highly profitable but immoral and, in some cases, unlawful practices.

Introducing a robust, efficient and effective supervisory scheme for vigilantly vetting the professionals should have a dramatic impact on the incidence of economic crime. Punish and get rid of the bad apples, and wrongdoers will lose their access to advice and support on how to hide or launder money. At present, 22 separate organisations supervise accountants and lawyers. Many of these bodies also act as advocates for their members and do not have effective systems in place separating their regulatory and advocacy functions.

There are a further three government bodies that supervise other relevant professionals. OPBAS, the body tasked with supervising the supervisors, recognises that the current system is inadequate. In its March 2026 report, it states that the supervisory bodies

“continue to perform poorly in their enforcement approach”,

and that some are not

“undertaking consistent, proportionate and sufficiently dissuasive disciplinary measures in circumstances where it would be warranted and justifiable”.

Statistics confirm this judgment. The Chartered Institute of Taxation found that 31% of firms it visited were not compliant with anti-money laundering regulation, yet only four were disciplined: three were fined and one was suspended. The Council for Licensed Conveyancers imposed no fines at all, despite finding that 62% of firms that it supervised were non-compliant. The Solicitors Regulation Authority cancelled the membership of just one professional body in 2023-24, and the fine imposed on Mishcon de Reya in 2022 for multiple breaches of the AML regulations was £232,500; it would have been £5.4 million had it been calculated by the rules used by the FCA. So, I strongly support the Government’s proposal to merge the supervisory bodies into one body that will operate within the FCA. This will create a simpler and more consistent framework that will be better placed to work with law enforcement agencies and will have access to data, allowing a joined-up approach across the professional disciplines.

However, I seek some assurances from the Minister to strengthen the effectiveness of the proposed change. To ensure that the FCA properly prioritises this work, will the Government ring-fence the funding the FCA will receive in fees from legal, accountancy and company service provider firms and ensure that those resources are used to fund its supervisory and enforcement duties on money laundering? Will the FCA maintain a register of supervised entities, as it does for financial institutions, so that companies providing unlawful services that are not registered can be identified? Will the Government ensure that data collected as part of the supervisory process can be shared with law enforcement agencies and that those agencies share their information with the supervisory arm of the FCA? Will the Government ensure that the FCA can access legally privileged documents from law firms, where that is required for regulatory purposes? Will the Government ensure that the FCA uses the enforcement powers in relation to professional services firms that it currently employs in relation to financial services firms? The threat of robust enforcement is always an effective deterrent to bad behaviour.

Finally, I am concerned that this excellent proposal will take time to implement, and I am worried about how effective supervision will be maintained during this period of transition. Will the Minister say what he proposes to do to ensure that the supervision of professionals is as robust as possible? I suggest that he gives OPBAS the power of public censure, so that it can name and shame those companies that deliberately fail to abide by the AML regulations, and the power to levy fines against supervisory bodies that fail to fulfil their obligations to remove supervisory responsibilities from those who fail to fulfil their duties. Will he consider creating a duty to ensure that the existing bodies co-operate with the FCA during the transition?

I welcome the proposal. I look forward to working with the Government to strengthen its effectiveness and to protect the supervision of professionals during the transition to the new scheme.