FinCEN files: a spotlight on UK money laundering
22 September: The FinCEN documents highlight the UK’s problem with money laundering. How can ICAEW members do their part in the battle against economic crime?
If the FinCEN files tell us anything about money laundering, it’s that it is prevalent and difficult to detect. It highlights both the necessity for regulated professions and organisations to be vigilant and report suspicious activity where it arises. It also puts a spotlight on some of the complexities around making such reports.
Among the 2,657 documents – 2,121 of which were Suspicious Activity Reports (SARs) – are cases of Ponzi schemes, gangsters on the FBI’s Most Wanted list, and sanctioned oligarchs circumventing the rules. While the files are from the US Financial Crimes Enforcement Network, the UK appears frequently in the documents.
The intelligence division FinCEN classifies the UK as a ‘higher risk jurisdiction’ because of the number of UK companies that appear in its SARs. Over 3,000 UK companies appear in the FinCEN files; more than any other region.
For example, the documents mention Suite 2B, 175 Darkes Lane in Potters Bar, Hertfordshire. It is the listed address of more than 1,000 companies, many of which feature in reports of suspected money laundering. The UK government has announced reforms to Companies House. Directors will not be appointed until their identity has been verified and Companies House will be given powers to query, investigate and remove false information, with the aim of increasing the reliability of the data showing who is behind each company. These changes will be covered in full in another article.
Some criminal activity can be difficult to trace. ICAEW members must remain vigilant, vet possible clients carefully, and flag any suspicions with the National Crime Agency (NCA). ICAEW has been leading the work to update the CCAB AML guidance for the accountancy sector, which has been published this month.
“Our members should never be knowingly involved in any kind of money laundering or financial crime,” says Sophie Wales, ICAEW’s Head of Ethics and Economic Crime. “This story shows how important it is to understand who is ultimately owning and controlling your clients and that you understand the commercial rationale for any activity that you're asked to advise on or become involved with in any way.”
You are obligated to report a suspicion of money laundering activity to the NCA. This does not necessarily mean that you have actual knowledge or proof, as suspicion is a lower hurdle. That can add to the complexity of issues to consider when reporting suspicious activity. There is a tightrope to walk when it comes to deciding whether you should continue to act on that client’s behalf.
“It’s a bit of a grey area. You need to consider whether your suspicion is such that for professional or commercial reasons you no longer want to act for that client. In some cases, there might be a public interest reason for you to continue to provide services to the client,” Wales explains. “For example, say you're working on an insolvency engagement and you're helping to return funds to creditors. Just because you've identified that there may have been some criminal activity by the former owners and some of the money you're dealing with this tainted, most people would agree that it's still in the public interest for you to act. Subject, of course, to getting the necessary Defence Against Money Laundering from the NCA to deal with those funds”
You should also consider how you end the relationship with a client where you have reported your suspicions to the NCA, as you cannot tip them off that you’ve made a report. You must also be careful when answering professional enquiry letters from that client’s new advisor as well. You should not disclose to the new advisers that you have made a SAR, as this may constitute tipping off.
Remember that as an ICAEW member, all of your ethical responsibilities will stand. Use your ethical and legal obligations as a foundation for the decisions that you make. Speak to ICAEW’s ethics and AML helpline if you are unsure how to act when ending the professional relationship with a client about whom you hold suspicions of wrongdoing.
“Where there is a clear disagreement on how to report certain information, for example, you could say: ‘I no longer wish to act for you because of the disagreement’,” says Wales. “But where it's a more complicated piece of structuring work, that could be more complicated due to the commercial ramifications for the client of you ceasing services. It’s not a straightforward situation to navigate, which is why it can be useful to seek out additional advice.”
The CCAB Anti-Money Laundering guidance for the accountancy sector can be found here.
Members wishing to seek advice from ICAEW's Ethics Advisory Service. This is a confidential free helpline, exempt from the duty to report professional misconduct within ICAEW. Call +44 (0)1908 248 250 or email: firstname.lastname@example.org.