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Money laundering and how to spot it

Author: ICAEW Insights

Published: 07 Mar 2022

A new ICAEW educational drama produced in collaboration with HMRC launching today brings to life the stark ramifications of money laundering – as the conflict in Ukraine sees government moves to clamp down on economic crime gather pace.

With a growing impetus to clamp down on money laundering against a backdrop of rising geopolitical tensions, the launch today of a training film produced by ICAEW in collaboration with HMRC is timely, bearing in mind that high-end money laundering schemes are often facilitated by the abuse of legitimate processes and services.

Russia’s invasion of Ukraine has propelled action against economic crime – and money laundering in particular – to the fore, providing an impetus for the UK to bring forward its Economic Crime Bill. The new legislation will help the National Crime Agency prevent foreign owners from laundering their money in UK property through corporate vehicles, and ensure more oligarchs can be handed an Unexplained Wealth Order (UWO). 

“Those backing Putin have been put on notice: there will be nowhere to hide your ill-gotten gains,” Prime Minister Boris Johnson said in a statement. “There is no place for dirty money in the UK.”

Accounting professionals alongside their counterparts in the legal profession, and estate agents, can be criminally exploited. While it’s possible that some are complicit, it is much more likely that any assistance will be unwitting and unknowing – but either way, professional advisers can end up being part of the problem. 

While the risk of a professional adviser inadvertently assisting a criminal is not high, the consequences can be devastating on a number of fronts. At a national level, money laundering has the potential to threaten the UK’s national security, national prosperity and international reputation. But there’s also a devastating human impact – behind the money laundering sit untold stories of misery, abuse, exploitation and horror.

The film, All Too Familiar, is the brainchild of Duncan Wiggetts, Chief Officer, Professional Standards at ICAEW, who was heralded by the Wall Street Journal for a previous film as the “accidental mogul of corporate film-making”. This latest film is ICAEW’s third educational drama made by Wiggetts, his seventh in total since he first started his initiative to use drama films to change behaviours of professional advisers and directors. It is the first to focus specifically on the issue of money laundering.

Wiggetts is more than qualified to take on the challenge. He is the representative for the accountancy regulators on the Economic Crime Strategic Board, a forum chaired by the Home Secretary and the Chancellor, which brings together government agencies, financial regulators, banks and professional bodies to enhance the fight against fraud and other economic crimes. It was following one of these meetings that Wiggetts, together with Simon York, the Director of Fraud and Investigations at HMRC, hatched a plan to use Wiggetts’ talent for film-making to tackle the issue of professionals inadvertently enabling money laundering.

Produced over the course of the last year, All Too Familiar focuses on how firms can put themselves and others at risk if they do not carry out proper anti-money laundering (AML) checks and due diligence. The film’s main aim is to challenge professional mindsets and provoke discussion about how long-held relationships can cloud judgement, leading professional advisers to miss red flags and even overlook suspicious behaviours.

The film looks at the human cost of money laundering focusing on a failing restaurant chain run by Alex Murati. When Jack, Alex’s longstanding accountant, suggests insolvency, Alex reveals that the business may be saved by a cash injection from one of his cousins. Subsequently, radical changes take place in the business, which are identified by both Jack’s firm and accountants at another firm employed to carry out payroll work for the business, but are not treated as suspicious. All of the ‘red flags’ are based on real life examples put forward by ICAEW and HMRC.

“We wanted accountants to see how easy it might be for them to become professional enablers, so they stay alert and carry out all the compliance checks the regulations require,” explains Wiggetts.

Wiggetts says the sanctions put in place by the UK government will undoubtedly make it more difficult for dirty Russian money to be laundered in the UK. What’s also true, however, is that criminals are clever and dirty money will find its way into the country via ever more devious means. 

“But this absolutely isn’t just a Russia issue,” Wiggetts says. “There are, and will continue to be, sophisticated gangs of criminals of all nationalities that will try to launder money through UK businesses and property. The message from the film is that you should be a lot more sceptical generally because criminals are becoming more and more sophisticated.”

Firms have become a lot wiser about potential money laundering risks posed by new clients, Wiggetts says. “The biggest firms have risk and compliance departments that will not allow the partners to record any chargeable time until they have performed their client due diligence.” However, criminals may focus their efforts instead on cuckooing into existing companies, which is why the film’s storyline is so pertinent. 

“In that situation, the onus is on the partner – and not the risk people – to spot the unusual, unexplained changes in their client’s business. Unfortunately, in our experience as an AML supervisor, accountants don’t always ask enough questions about the people they’re assisting.

“Often, when our quality assurance monitors find that all of the right AML checks have not been carried out, the firm’s initial response will be to explain that they have known that client for many years so they didn’t think the checks were necessary. Others see the checks as unnecessary red tape. 

“We want to change mindsets away from regarding the checks as a tiresome compliance exercise to professional advisers seeing themselves as being an important part of the fight against economic crime and realising that maybe the checks will allow them to spot something that saves them from being the person that assists a criminal enterprise,” Wiggetts says. 

At the end of the film, the accountants are horrified when they find out they have been assisting criminals, not just to launder money through a business, but also to exploit young, trafficked girls. “We’re trying to get accountants watching the film to realise that they don’t ever want to be in that situation,” Wiggetts says. 

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