Money laundering: what are the risks for accountants?

With 15,000 customers thought to be involved and an investigation into €200 billion of payments, the crisis engulfing Denmark’s largest bank has been described as “the biggest scandal” in Europe.

In September, Danske Bank’s chief executive Thomas Borgen resigned following an internal investigation into suspicious payments made through its Estonian branch. The bank has said it’s unable to determine a final figure for just how much money was potentially laundered through Estonia between 2007 and 2015

Borgen was cleared of any legal wrongdoing in the investigation but the findings have prompted fresh regulatory action, talk of substantial fines if illegal activity is determined and a possible criminal investigation from US authorities.

The latest scandal is enormous and involves a large organisation but it is also another wake-up call for those working at all levels in financial services.

“What happened with Danske Bank is particularly a concern because you are talking about systemic, cultural issues rather than rogue players or poor practices in a certain area, and a lot of it seems to be fairly basic stuff around checking who you are doing business with and where their money comes from,” explains Adam Williamson, the AAT’s head of professional standards.

The National Crime Agency estimates that hundreds of billions of pounds of international criminal money is laundered through UK banks and their subsidiaries each year.

Spotting the money laundering signs

Accountants should know what the signs of money laundering are and how to spot them, as they occupy a front-line position when it comes to handling clients and their information. The Serious Fraud Office gives three examples of “tell-tale signs” that might prompt a suspicious activity report (SAR) to the NCA: a long-term client starts making out-of-character requests, a client keeps asking for services outside of you or your firm’s expertise, or a client is requesting arrangements that make no financial sense.

The Proceeds of Organised Crime Act (POCA) not only includes offences for individuals directly involved in money laundering but also makes it a crime if you fail to disclose knowledge or suspicion of money laundering. Money laundering regulations require accountants to disclose any relevant suspicions and failure to follow the required steps can also amount to a criminal offence.

“It’s worth going back to basics and starting with the statutory regime. What does it expect of you as an accountant and what does it say?” explains Aziz Rahman of business crime solicitors Rahman Ravelli.

“You don’t have to know there’s something going on you have to start there [at the point of suspicion]. As soon as you make an authorised disclosure, you are protected.

Indeed, there are clear rules and procedures for accountants to follow to ensure they comply with anti-money laundering regulations. But a soon-to-be-published report from the global Financial Action Task Force (FATF) says stronger supervision by the UK government of lawyers and accountants for anti-money laundering purposes is needed.

“I don’t think there’s a lack of awareness. I think the issue is perhaps not always being entirely in line with the regulations,” says Williamson.

“Just because someone doesn’t cross the ‘ts’ and dot the ‘is’ doesn’t mean they’re not aware and not paying attention. But the trouble is if you don’t demonstrate that level of detail, then it’s difficult to show that you are above board. That’s why we have to promote the real enforcement and supervision of the letter of the law, not just the spirit.”

Staying up to date on legislation

Accountants and their employers must be aware of the latest legislation relating to anti-money laundering and ensure that all their staff, both full and part-time, and working practices are in a position to comply. But reactive compliance with legislation is not enough alone: accountants and firms should prepare for changes in the regulatory and legislative fields ahead of time, such as the forthcoming fifth EU anti-money laundering directive.

“You can’t wait for the legislation in these cases because we need to act more quickly,” says Jane Jee, CEO of anti-money laundering experts, Kompli-Global.

To be more proactive and alert with regards to money laundering, the sector’s use of technology for prevention and detection must develop, says Jee: “The way in which criminals exploit the system and technology is evolving all the time; to counter it we need to do the same.”

“Quite a lot of money laundering might not have happened if people had access to the right information before they did their risk assessment,” she adds, explaining that artificial intelligence, machine learning and big data can increasingly help with due diligence and checks on clients and entities involve in transactions. Emerging technologies, such as real-time search platforms, can return more consistent, timely and cross-border results from a broader range of sources while giving accountants a record of what they have done for regulators.

Cryptocurrency and crime

Understanding cryptocurrency is another growing area for accountants in the fight against money laundering.

“While it’s a secure method of carrying out currency exchanges and transactions, there needs to be a little bit more due diligence,” says Rahman.

“Ask why they can’t use a usual bank transfer. Is it a reliable platform this is coming from? Has there been any business before between the parties?”

For smaller firms, “competing priorities” can present a challenge to following existing procedures and keeping on top of new legislation. Balancing changing working practices to comply with GDPR in the past year with conducting criminality checks on staff for relevant convictions as part of AML measures and continuing to provide services to clients is just one example, says Williamson: “There’s not a wilful attempt to avoid regulations; it’s more a tendency to be human, and be busy.”

If accountants and firms don’t manage these priorities, however, when it comes to AML, the biggest risks are criminal convictions, fines and ruined careers. Accountants and other financial professionals have been given a “grace period” during the awareness-raising part of anti-money-laundering campaigns, suggests Williamson: “[The message we’re getting is] now is really the time to get your houses in order because if you are breaking the law you will be dealt with accordingly.”

“The regime is clearly becoming much more strict. It will no longer be good enough to just abide by the spirit of the law.”

As Rahman says, when it comes to checks and reporting suspicions: “Always go for more, always go that extra mile, because if this goes wrong, nevermind regulatory sanctions, you can go to prison.”

Laura Oliver is a Freelance Journalist and Former Head of Social and Community at the Guardian.