FCA Censure Exposes Deep Supervisory Gaps in UK Bookkeeping Sector

Serious supervisory lapses at one of the UK’s major professional bodies have drawn attention to significant money-laundering vulnerabilities across the bookkeeping profession. The Financial Conduct Authority (FCA) has issued a formal public censure against the Institute of Certified Bookkeepers (ICB) after uncovering extensive deficiencies in the organisation’s oversight obligations. According to the regulator, the failings reflected systemic weaknesses that persisted for more than a year and directly undermined the functioning of the Money Laundering Regulations 2017. Central to the case were the suspension of routine inspections and the absence of a credible risk-based supervisory framework—failures that left thousands of supervised firms without meaningful scrutiny.

The shortcomings identified by the FCA illustrate how core supervisory safeguards designed to prevent criminal activity from entering the financial system were allowed to deteriorate. The ICB, which oversees more than three thousand bookkeepers under the UK’s anti-money-laundering regime, is expected to maintain structured monitoring programs and ongoing risk assessments. Instead, between early 2022 and mid-2023, the organisation failed to uphold these responsibilities, permitting essential oversight mechanisms to fall away. For nine months, both onsite and virtual inspections were halted entirely, creating a prolonged window during which member firms operated with no external checks. This suspension removed one of the principal tools supervisors rely on to test firms’ controls and detect indicators of illicit financial flows. In practice, it significantly increased the likelihood that shortcomings in customer due diligence, record-keeping, or suspicious activity reporting processes went unnoticed.

The FCA also reported that the organisation had not implemented a functioning risk-based methodology to guide supervisory decisions. Without such a framework, the supervisor was unable to distinguish between firms presenting greater or lesser exposure to money-laundering threats, nor could it allocate resources effectively to address the most urgent vulnerabilities. A risk-based approach is fundamental to the Money Laundering Regulations 2017 and forms a central expectation for any supervisory body in the UK. In its absence, oversight becomes fragmentary, inconsistent, and susceptible to substantial blind spots. The FCA stressed that “any lapse in these duties exposes regulated sectors to criminal misuse and can weaken trust in the broader financial environment.”

The facts highlighted by the regulator show how gaps in supervisory coverage increase the likelihood of money-laundering risks materialising. Member firms depend on clear supervisory direction to maintain compliance, and disruptions to that structure can reduce vigilance. The absence of inspections between January 2022 and July 2023 created a period of minimal external accountability. During such intervals, criminals may attempt to exploit small bookkeeping practices that often rely on manual systems or have limited resources to detect sophisticated risks. These firms frequently handle financial records, invoices, payment flows, and business accounts—assets that can be manipulated to mask the movement or origin of criminal funds. When a supervisor ceases regular engagement, the probability that warning signs go undetected rises sharply.

Regulators have consistently made clear that professional body supervisors must sustain appropriate monitoring activity to uphold the UK’s financial-crime defences. The FCA’s findings reinforce the requirement for supervisors to run structured inspection programmes, maintain current risk assessments, and use robust escalation processes when concerns arise. The Organisation for Professional Body Anti-Money Laundering Supervision continues to monitor compliance with these expectations and requires supervisors to retain documented methodologies, sector-specific risk assessments, and resilient governance arrangements. Failures to meet these standards carry not only regulatory implications but also threaten practical efforts to identify emerging laundering techniques in small and medium-sized enterprises.

The censure also brings into sharp focus deeper structural issues within parts of the professional oversight landscape. The nine-month halt to supervisory activity suggests operational difficulties that extended beyond short-term disruption. When a supervisory body cannot maintain its programme, the quality of monitoring across the sector deteriorates, leaving regulated firms uncertain about standards and enforcement. Such breakdowns undermine national initiatives aimed at detecting complex laundering strategies, including the layering of funds through bookkeeping systems, misuse of business accounts, or the fabrication of invoices to legitimise criminal proceeds.

According to the FCA, the weaknesses were either caused or exacerbated by the inspection freeze, indicating that internal decision-making fell out of step with regulatory expectations during a period of heightened financial-crime risk. The absence of a functioning risk-based approach meant the supervisor had no reliable method to identify firms in urgent need of scrutiny. Without this mechanism, opportunities for criminals to exploit weak controls expand. Bookkeepers may inadvertently process transactions linked to illicit networks or rely on outdated verification checks when onboarding clients. When supervisory oversight and guidance decline, such practices risk becoming embedded.

This action comes as the UK government prepares to transition to a new supervisory model that will establish the FCA as the Single Professional Services Supervisor. The reform aims to strengthen oversight across the legal and accountancy sectors. Until the new framework is introduced, however, existing professional body supervisors remain responsible for delivering effective monitoring. The FCA made clear that it will pursue enforcement where performance falls short of required standards.

The censure stands as a clear signal to the professional services community that disciplined, continuous supervision is essential to protect against money-laundering threats. The regulator stressed that robust oversight is necessary to confirm that anti-money-laundering safeguards function in practice rather than existing merely on paper. Supervisory bodies must maintain uninterrupted monitoring cycles, articulate risk-based methodologies, and carry out timely inspections. These elements are critical to identifying weaknesses early, compelling firms to remedy deficiencies, and preventing criminals from exploiting systemic gaps.

Professional body supervisors also have a crucial role in reinforcing to smaller firms that anti-money-laundering duties are mandatory and non-negotiable. Breaks in inspection activity, unclear risk frameworks, or limited engagement can inadvertently weaken that message. The lessons emerging from this case underscore the need for sound governance, comprehensive documentation, and predictable supervision schedules. When these foundations operate as intended, they offer meaningful protection to the financial system and reassure the public that supervisory bodies remain active, effective, and alert to evolving illicit-finance risks.

By fLEXI tEAM