Ten things that a practitioner should know about money laundering.
The authoritative guidance by which accountants and their firms may be judged, ultimately, by disciplinary tribunals and the courts of law is issued by the Consultative Committee of Accountancy Bodies (CCAB) and can be accessed here.
1. What is a ‘money laundering offence’? Any person will commit a money laundering offence if they deal, in any of the ways, with property that they know or suspect is the result of criminal conduct as committed either in the UK or elsewhere (provided it would amount to criminal conduct here). A person will also commit a money laundering offence if they attempt, conspire or incite a person to commit one of the offences, or aids, abets, counsels or procures the commission of any of them. 2. What is ‘criminal property’? Property is defined as any sort of property, wherever it is situated, including money, all forms of property (real, personal and intangible) and things in action. Property is ‘criminal property’ if it constitutes or represents a person’s benefit from criminal conduct AND the alleged offender knows or suspects that it constitutes or represents such benefit. Examples of the offences that will be caught by AMLR are:
smuggling, including drug trafficking and illegal arms sales.
3. What are an accountant’s responsibilities under the law?
the duty to carry out client due diligence (CDD)
the duty to put in place in-house policies and procedures to guard against money laundering
the duty to report known or suspected involvement in money laundering
the responsibility to seek consent to act in respect of actual or possible involvement in money laundering activity
the duty not to ‘tip off’
the duty to report known or suspected involvement in the financing of terrorism
4. What is Client Due Diligence (CDD)? Client due diligence (CDD) is the procedure whereby a practising accountant takes steps to identify a prospective client, the purpose of which is to ensure that accountants are able to comply with the dictum ‘Know your Client’ (KYC). Accountants should not only know who their clients are but should also understand the motives of the client and the nature of his business. CDD checks are made expressly subject to the assessment of risk. What this ‘risk-based approach’ means is that firms are expected to weigh up the perceived risk of dealing with particular clients. Based on this assessment they should determine the extent of information that is needed in order to enable them to satisfy themselves about the identity of the client concerned (and, indeed, in deciding whether or not they wish to act for that client at all).
5. Which clients are considered ‘high-risk’ for the purpose of AML? There are two specific types of ‘high-risk’ situation where the AML actually require accountants to carry out ‘enhanced’ due diligence:
where the new client has not been physically present for identification purposes
where the new client is a ‘politically exposed person’ (PEP) – a PEP is someone who is or has in the last year exercised a prominent public function in a foreign country, an EU institution or an international body, or a family member or known close associate of such a person.
6. Can I place reliance on CDD carried out by others? The Regulations say that you are not obliged to undertake all the CDD work yourself, and that you may seek to rely on the CDD checks that have been carried out by another person, such as, for example, the new client’s previous accountant. Any decision on whether to seek to rely on someone else’s CDD work is your own to make, but you should remember that, if you do place reliance in this way, you will remain liable under the Regulations for any failure to comply with the CDD requirements. Reliance can only be made on certain classes of person, namely those that are covered by regulation 17 and Schedule 3 of the Money Laundering Regulations 2007.
7. How long CDD records should be kept? CDD records must be retained for a minimum of five years from the end of the business relationship or the date of any occasional transaction which might have been carried out. 8. What are an accountancy firm’s compliance responsibilities? Firms are required to implement in-house systems and controls to ensure that Money Laundering is prevented as far as possible. These should include:
the appointment of a Money Laundering Reporting Officer
the adoption of detailed policies and procedures for complying with the Regulations
relevant employees of firms must be given regular training to ensure awareness of the law and ability to recognise suspicious transactions.
9. When should a report to National Crime Agency (NCA) be made? Accountants in practice must report to NCA as soon as possible if:
they know or suspect that someone is engaged in ML or TF; and
the information has come to them in the course of their business; and
they can identify or assist in identifying the person or people under suspicion.
Suspicion may fall short of actual knowledge, but is more than a vague hunch.
There is no threshold of materiality for either the nature of the criminal activity or the amount of the associated proceeds. Reporting a suspicious activity to NCA does not in itself prevent an accountant from continuing to provide services to the client who is the subject of the report. Accountants are not obliged to report if they have a reasonable excuse for not doing so (this might involve a threat of violence) or professional legal privilege applies.
10. What is ‘tipping off’? An accountant in a practising firm must not:
disclose that a disclosure has been made of information obtained in the course of the practice either to an MLRO or to NCA, where the disclosure is likely to prejudice any investigation that might be conducted following the disclosure referred to
disclose that an investigation into allegations that a money laundering offence (which came to light in the course of the accountancy practice) has been committed, is being contemplated or is being carried out, and the disclosure is likely to prejudice that investigation.
An offence will not be committed if the person making the disclosure does not know or suspect that it is likely to prejudice any resulting investigation. There are a number of exceptions as follows:
if the disclosure is made to a member of the same firm
if the disclosure is made to another relevant professional adviser or to an ‘independent legal professional’ where both are based in the UK (or another EAA state or a state imposing equivalent AML requirements)
if the disclosure is made to a ‘money laundering supervisory authority’ under the Money Laundering Regulations or for the purpose of detecting, investigating or prosecuting a criminal offence in the UK or elsewhere
if the disclosure is made to the client for the purpose of dissuading the client from engaging in conduct amounting to an offence.
Further guidance and future developments Further guidance on anti-money laundering for accountancy sector can be found on ACCA website, on Joint Money Laundering Steering Group (JMLSG) website, National Crime Agency (NCA) website and HM Treasury website
As previously highlighted, on 1 September 2016 NCA issued changes to the Suspicious Activity Report (SAR) glossary codes and clarification of reporting routes, which set out new requirements that all under the reporting regime must adopt.