Many chartered accountants go through their careers without encountering significant economic crime. Some will come across minor misdemeanours, but we tend to think that major fraud could not happen to us or our clients and reassure ourselves that we do not work with people or organisations that lack integrity.
But the reality is that as trusted professionals, we are key gateways through which criminals seek to legitimise unlawful activity. The illegal trade in drugs, smuggling goods (with increased potential post-Brexit), prostitution, people trafficking or other criminal activity, is usually followed by laundering the proceeds of the ill-gotten gains.
Some criminals will attempt to ‘clean’ their money in overseas jurisdictions, but many will seek to buy restaurants or small businesses – that won’t attract attention – and channel as much money through them as they can. ICAEW members may well encounter these businesses – either directly as clients, or in their wider professional or even personal lives.
Be alert and vigilant
Members’ professional scepticism may alert them to something that doesn't feel right. If so, there will likely be more questions to ask.
Look out for the business with few customers but which produces a significant turnover. Or the business that operates in a low-margin sector but enjoys high-margin profits. Suspicion could be aroused for all sorts of reasons and, if so, members should take action.
We must remember that currently, the opportunity for fraud is immense. Governments around the world have introduced economic support measures to assist legitimate businesses through COVID, and we know that unscrupulous individuals have been taking advantage and abusing the system.
Members must not turn a blind eye or allow themselves to become in any way complicit. Our responsibilities are founded in the ethics underpinning our profession – specifically ICAEW’s Code of Ethics – and in our training to be vigilant.
In investigating suspected wrongdoing, our role is to report anything untoward to law enforcement for further investigation. I would caution members that criminal gangs have no regard for professionalism; they are often dangerous and it is not for us to put ourselves in harm’s way.
It is crucial that you perform client due diligence and make sure you know who you are doing business with. This could help you spot any ‘red flags’ before it’s too late.
Economic crime is not always conducted in as obvious a manner as we expect. Criminals draw in a business over time and exploit a vulnerability that even the smartest professional adviser might struggle to detect. For example, in the current climate, some businesses may be tempted to accept a loan or investment derived from criminal activity.
Failing to be vigilant and unwittingly becoming complicit in economic crime can have serious consequences for the career of a finance professional – including in the most extreme cases loss of professional qualifications and a criminal conviction.
We have extensive online resources to help members remain as prepared as possible, which I encourage you to take full advantage of, particularly at this volatile time.
Please visit www.icaew.com/fraud and www.icaew.com/moneylaundering for comprehensive guidance, support, case studies and more on these important areas.
Additionally, if you believe you may have detected evidence of economic crime, please call ICAEW’s fraud advisory helpline on 01908 248250. You can do so anonymously should you wish.
Company reform and economic crime
The Economic Crime Act 2022 became law in March and part two of the bill is incoming. From risks to required changes, we explore key considerations for accountants on the issue.