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Money Laundering Mayhem

Money Laundering Mayhem

During the Autumn we’ve been delivering a number of Anti Money Laundering (AML) refresher and update sessions. Here are some of the key themes arising:

  1. Regulators are on the offensive

Supervisory bodies like ICAEW and ACCA are now regulated by an overall supervisory body called the Office for Professional Body Anti-Money Laundering Supervision (‘OPBAS’). A recent report from OPBAS has indicated that the level of supervision across the accountancy sector is patchy. As a result, on practice visits, professional bodies are challenging firms VERY hard on their policies and procedures.

  1. Off the shelf systems are preferred

ICAEW’s ‘Practice Assurance Monitoring 2019’ report, downloadable from www.icaew.com, indicates that most firms use a commercially available AML manual. Anecdotal evidence is that professional bodies strongly encourage firms to invest in such a manual – but to tailor it as appropriate (see below).

  1. Tick box mentality a ‘no-no’

The requirement for a firm level risk assessment in respect of money laundering and terrorist financing (MLTF) has been around for 18 months now – and the need for a risk assessment in respect of individual clients for even longer. Checklists can aid in this process but if regulators feel that insufficient thought has gone into ticking boxes, they will clamp down hard. Don’t be afraid to document ‘know your customer (KYC)’ considerations in a narrative format on the file.

  1. Professional bodies are testing knowledge

Some MLROs think that if new starters are sat in front of a short webinar on day one and asked to complete a self-test quiz, their obligation to provide training is fulfilled. Be careful here. Indications are that, on professional body visits, staff are being spoken to individually to check what they know. Where the ‘visit’ takes the form of a ‘desktop review’, the inspector might instead call individual members of your team. Embedding and reinforcing awareness of this crucial subject at internal team meetings has never been more important.

  1. Ongoing due diligence checks remain challenging

Ongoing due diligence (ODD) continues to catch firms out on regulatory visits. Professional bodies will pick a sample of clients and check what work you’ve done. Clients that don’t fit the usual mould might be the ones you fall short on. On a recent ICAEW Practice Assurance webinar a warning was given about lax ODD procedures in respect of ‘payroll only’ clients.

  1. Electronic tools are perhaps the way forward

Practitioners have often commented that just having a copy of a passport or driving licence tells you nothing. This is a fair point, but surely understanding the real client proposition (proper KYC) has always been the most important aspect of the process.

It might also be that, when the UK version of the 5th AML Directive is published late this year/early next for implementation on 10 January 2020, electronic tools to check for client misdemeanours will become mandatory for all. This could be a game changer for smaller practices. Watch this space!

  1. Accountants perhaps don’t report enough

Whilst the number of Suspicious Activity Reports (SARs) overall increases, the number of SARS from accountants continues to decrease. The NCA’s recent 2019 ‘SARs Annual Report’ downloadable from the National Crime Agency Website bears this out – less than one SAR per firm per annum on average.

  1. Some law enforcement professionals feel accountants fail to spot the obvious

A law enforcement representative we met on a recent course stated that accountants generally lack ‘professional scepticism’ and don’t spot and/or report the most blindingly obvious frauds. With ‘money laundering’ very widely defined and no de-minimis for reporting (still!!) they may just have a point.

If you think you might be underreporting, check out the helpful resources at Flag it up campaign. This will be a key theme in our courses and workshops throughout 2020.

Peter Herbert

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