Changes to the Money Laundering Regulations
In July, the Government published a new statutory instrument to amend the money laundering regulations: The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022.
Many of the proposed changes do not impact on the accountancy sector. However, there are a few key areas for ICAEW firms to note.
There is a new requirement for all supervised firms to perform a proliferation financing (PF) risk assessment (similar to the AML firm-wide risk assessment) so that each firm can assess the risk it may be used to enable proliferation financing. This requirement came into effect 1 September 2022. We are currently updating the AML guidance for the accountancy sector to set out guidance on how firms can perform this risk assessment.
The government has expanded the discrepancy reporting requirement to cover the ongoing business relationship. This means that when an ICAEW firm undertakes ongoing customer due diligence (CDD) they will also be required to report discrepancies against information held on the appropriate register as they would have under the existing provisions under Regulation 30A. The government has also decided to streamline the requirement so that it is clear only ‘material discrepancies’ need to be reported, and to provide a list setting out which types of discrepancy would be ‘material’. This requirement will come into force in April 2023.
High-risk third countries
HM Treasury issued an Advisory Notice for high-risk third countries (HRTC) on 14 November. Pakistan and Nicaragua have been removed from the list. Democratic Republic of the Congo, Mozambique and Tanzania have been added. The Money Laundering Regulations require forms to apply enhanced customer due diligence to any client established in a HRTC or to any transaction where either party is established in a HRTC.
Register of Overseas Entities – verification services
The Government introduced the Register of Overseas Entities (ROE) on 1 August 2022. The ROE is designed to help identify foreign owners of UK property and address the risk that foreign criminals may launder money through UK property. As part of the registration process, an overseas entity must have its registrable beneficial owners verified and accountants may perform this verification work. You can read what the Register of Overseas Entities means for accountants. If you wish to perform the work you should read the BEIS guidance. The Law Society has also published guidance.
Companies House has recently published information about registrations to date. 31% of filings have been rejected, and most of these rejections were due to errors in the agent information section – for example, where the UK-regulated agent details provided by the overseas entity do not match the details provided by the agent on the AG01 form. Common errors include the registry name being abbreviated or incorrect, and inconsistencies in the agent’s name, overall person with responsibility, address, and email address.
To make sure registrations are processed quickly, Companies House recommend that firms:
- work with clients to make sure all the information is correct before their registration is submitted;
- file as early as possible before the deadline of 31 January 2023; and
- file on behalf of client.
It’s important that overseas entities register on time to avoid prosecution or civil financial penalties. Overseas entities that fail to register will also find it difficult to sell, lease or raise charges over their land.
Prohibition on Provision of Accountancy Services to Russia comes into force
The Government has now published "The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022", which implements the ban on the export of accounting services.
The definition of ‘accountancy services’ within the regulations is taken from the CCPC Code of 1990 (UN Central Product Classification) but doesn’t currently include statutory audit. Section 13 inserts Chapter 6B, ‘Professional and Business Services’, which defines “accounting services” as follows:
- Accounting review services, which are services involving the review by a person of annual and interim financial statements and other accounting information, but excluding auditing services.
- Compilation of financial statements services, which are services involving the compilation by a person of financial statements from information provided by a client, including preparation services of business tax returns when provided together with the preparation of financial statements for a single fee, but excluding such preparation services of business tax returns when provided as a separate service.
- Other accounting services such as attestations, valuations, preparation services of pro forma statements.
- Bookkeeping services, which are services consisting of classifying and recording business transactions in terms of money or some unit of measurement in the books of account, but excluding bookkeeping services related to tax returns.
New suspicious activity reports (SARs) portal
How accountancy firms are helping to detect COVID fraud
ICAEW firms are playing a key role in identifying and dealing with COVID fraud. We talk to Michelle Giddings, ICAEW’s Head of AML, about a recent survey that shows how firms are encouraging clients to pay back ineligible claims, and supporting law enforcement by reporting fraudulent activities.
Sanctions Thematic Review 2022
Does your firm automatically sanction screen clients?
The pace of change and the volume of sanctions imposed in 2022 has increased the risk of ICAEW supervised firms inadvertently enabling sanctions evasion. As part of our work as an anti-money laundering supervisor, we recognised the need to perform monitoring activity to identify and mitigate the risks. The results of the ICAEW Sanctions Thematic Review 2022 indicate firms have increased the intensity and frequency of their existing sanctions screening procedures. Use this review to benchmark your firm’s policies and procedures for screening clients, to assess the level of risk to which your firm may be exposed and to mitigate these risks by implementing the policies and procedures outlined in this review.
Office of Financial Sanctions Implementation (OFSI)
As a result of the increasing number of new designations under the Russia and Belarus regimes, and the correlating increase in the number of those seeking a licence from OFSI for the payment of legal fees, OFSI has issued a general licence to permit the payment of legal fees owed by individuals and entities designated under either of these regimes. The licence was issued on 28 October 2022.
Office of Financial Sanctions Implementation (OFSI) and National Crime Agency (NCA) red alert: evasion typologies
In conjunction with the OFSI, the Joint Money Laundering Intelligence Taskforce (JMLIT) and Sanctions Facilitators Cell, law enforcement, private industry and regulators, the NCA has issued a 'Red Alert' on financial sanctions evasion typologies by Russian elites and enablers.
The purpose of the alert is to provide information from law enforcement and the legal and financial services sectors on some of the common techniques designated persons and their UK enablers are suspected to be using to evade financial sanctions.
UKFIU SARs In Action magazine
UKFIU SARs Reporting Booklet
How firms are using All Too Familiar
All Too Familiar aims to challenge mindsets and provoke discussion on the need for greater professional scepticism when faced with potential money laundering risks. This award-wining training film is being used by firms and companies around the world to support their in-house training.
Anti-money laundering helpline
ICAEW members can phone in anonymously if they wish to speak to an advisor about suspected illegal activity or any matter that may trigger a need to submit a suspicious activity report.
Raise an AML concern
If you believe a firm supervised by ICAEW is breaching the Money Laundering Regulations, you can raise your concern confidentially.
AMLbites
Providing you with the basics on popular money laundering topics through short 10-minute videos.
The videos are aimed at money laundering reporting officers, compliance principals and people in regulatory roles. They can also be used as a training tool for your staff as they are free for all to view.
Cryptoassets webinar: how to spot money laundering red flags
Our expert panel help you understand what is meant by cryptoassets, how crypto can be abused by criminals and what the warning signs or risk factors might be. They also discuss case studies and provide the view of a money laundering reporting officer.