Drug dealing, money laundering and crime – just another day in the office?

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Billions of pounds of illicit money are laundered in the UK every year and the authorities say it is happening far too easily.

When you hear stories on people trafficking, terrorism and drug cartels you wouldn’t think that would have much to do with your day job. Sat in your office with your morning cup of coffee, running through the company figures you could be closer to corruption that you think… 

As part of a new #AATPowerUp on Anti Money Laundering, we’ll be providing a range of content and resources on AML to give you the resources you need to combat what is now a huge problem for the UK.

Complete your AML survey

If you are an AAT licensed member who is supervised by AAT for AML, your firm must respond to our AML survey by Monday 6 December. Click below to find out more:

Find out more

Accountants: complicit or complacent?

Senior police officers have accused accountants of failing in their duty to draw attention to fishy financial dealings.

Crime commander Karen Baxter, national lead on economic crime, recently said accountants were ‘complicit’ or ‘complacent’ in laundering ‘dirty money’. She also criticised them for failing to report suspicious activities.

In recent weeks a Panorama documentary has also kept accountants in the spotlight. It raised questions as to whether accountants had fulfilled their duty to report suspicious activities at one of the world’s largest gold refineries, where a drug gang laundered money by selling 3.6 tonnes of gold.

The accountant concerned – EY – strenuously denies any wrongdoing and states its Dubai subsidiary ultimately helped bring to light the breach of applicable regulations. But the publicity has done little to improve perceptions of the profession.

Anti-money laundering: the issue

So, how exactly does the process of money laundering work?

On a small scale, it can be cash funnelled through small, apparently respectable, businesses that are a front for crime. For example, Walt White in Breaking Bad laundered his drug money through a car wash that wasn’t properly checked.

Money laundering can also operate on a much more industrial scale, with perpetrators passing tens of millions through financial and professional services, transferring funds through complex corporate webs, often via offshore jurisdictions.

If accountants are not diligent, they can be unwitting links in these chains. This is why they must carry out thorough checks when taking on new clients and setting up companies. They also have a legal obligation to report suspicious activities.

 “Accounting and legal professionals, and estate agents, can be criminally exploited – this is sometimes complicit, sometimes negligent, and sometimes unwitting,” says the National Crime Agency

How to submit a Suspicious Activity Report (SAR)

How to stop money laundering?

The simple fact is that the NCA is reliant on tip-offs in order to shut down money-laundering operations.

It needs accountants and other professionals to be its eyes and ears and to report dubious behaviour through Suspicious Activity Reports (SARs).

Last year, just 1.06% of all SARs came from accountants – a figure the police say is far too low. At the same time, HMRC, the Financial Conduct Authority and the NCA are putting more onus on accountants as a crucial source of information.

Complicity vs complacency

Mark Ballamy, a forensic accountant who has worked on many money laundering cases,  says that accountants need to be more sceptical of the people coming through their doors. “Too frequently, accountants do not insist on obtaining reliable, independent evidence that corroborates the economic activity undertaken by a prospective client that resulted in the client’s possession of wealth.”

Mark Halstead, a partner at Red Flag Alert (a credit risk management solutions company that specialises in anti-money laundering systems), believes that not enough accountants are doing enough to really meet the law. “It’s only about 0.01% of accountants that are complicit in money laundering,” he says. “The rest, you could argue, are complacent. That’s what the government wants us to wipe out.”

Record £7m HMRC fine

Accountants are obliged to report suspicious activity. If they are negligent –  or complicit –  they risk criminal convictions, fines and a ruined career.

Businesses could also pay an increasing heavy penalty for failing to uphold the law.

HMRC is getting tougher in issuing fines as it seeks to drive home the message that money-laundering has to be stopped. In September 2019, it issued a record fine against Touma Foreign Exchange Ltd – a money transfer business. Between June 2017 and September 2018, the business breached rules on:

  • Risk assessments and associated record-keeping
  • Policies, controls and procedures
  • Fundamental customer due diligence measures
  • Adequate staff training

6 ways AAT Licensed Accountants are failing

Touma’s failings are still shared by many accountants.

AAT conducts compliance monitoring of licensed accountants who it supervises for AML purposes. The process identified the following common shortcomings:

  • No written procedures, policies or controls.  
  • No initial or ongoing client due diligence procedures.
  • Members not carrying out an adequate risk assessment of clients.
  • No annual review of compliance with MLR2017.
  • No or inadequate training taking place.
  • No whole firm risk assessment being carried out.

Adam Williamson, AAT Head of Professional Standards sums it up like this:

“The simple, if harsh, message for accountants is that no-one is exempt. Big or small, high or low-risk services – it doesn’t matter.

“If you’re not fully compliant with the regulations then you’re committing an offence which also means, for AAT licensed members, removal of licence and membership. There is no more room for complacency.”

How to stay on top of AML

It is vital that AAT licensed accountants fully understand their responsibilities. We’ve put together an easy-to-follow guide summarising the key points for practices.

Licensed members must also complete AAT’s AML survey by Friday 6 December.

You can find out about the survey by clicking this link.

In Summary

  • Accountants are obliged to report suspicious activity if they come across it in their professional lives.
  • If they are negligent, or complicit, they risk criminal convictions, fines and a ruined career.
  • HMRC may impose measures, including a financial penalty, if you do not comply with the Money Laundering Regulations. In more serious cases, it may consider criminal prosecution.

Read more on AML as part of our #AATPowerUp Anti Money Laundering campaign for November:

David Nunn is Content Manager at AAT.

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