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AML telephone monitoring reviews: a two-way process

Author: Professional Standards Department

Published: 03 May 2022

Reviewers from ICAEW’s Quality Assurance Department (QAD) have introduced monitoring reviews focused solely on anti-money laundering (AML) compliance. We look at why your firm might receive a call, what you can do to prepare, and how to make the most of the advice on offer.

ICAEW’s Practice Assurance reviews have always included an AML element, but this is the first time QAD reviewers have undertaken AML-only reviews. The aim is to make sure that firms at higher risk of being used to facilitate money laundering are reviewed more often and in a more focused way.

“We are making our risk-based approach as efficient and effective as possible,” explains Sandy Price, AML Manager, Professional Standards, ICAEW. “We’ve developed a methodology of risk-scoring, which means some firms will now get an AML review in isolation because we think they need to be monitored more often than is feasible in the usual Practice Assurance cycle.” 

The AML-only reviews take place via a video or telephone call and cover AML policies, procedures and other documents and processes such as the firm-wide risk assessment. The idea is not only to review compliance but also to check-in with the firm, answer any questions and offer advice.

“The firms we’ve been speaking to so far have felt it to be a very positive experience,” says Price. “The review is designed to ensure we can assess the effectiveness of your AML procedures, as well as your own understanding of risk but we build in time to give you an opportunity to ask questions and learn more as well.”

“You go into it thinking you're under the microscope, but really it's a two-way process and it's up to you to get something out of it as well,” says Kevin Gregory, Partner at Roddis, Taylor Robinson, which recently went through an AML review. “You might go into it with dread, but you come out of it with comfort. It just gives me reassurance that we are getting it right.”

Why our firm?

Not every firm will get a review call. “It's very much predicated on where a firm sits in terms of risk,” explains Price. “Every firm has what we call an AML risk score, which is mainly drawn from information in the annual return.”

Various factors feed into the risk scoring. “So, for example, if the firm handles client money then there's a risk of that client account being used to facilitate money laundering,” explains Price. “Or the firm might have high-risk clients such as politically exposed persons (PEPs) or those in high-risk jurisdictions or industries, or with high net worth.”

Each reviewer will explain the risk-scoring process at the beginning of the review call, and outline what it is about the firm’s profile that has led to its selection.

“In essence, it comes down to the information in your annual return,” emphasises Price. “Firms are required to submit accurate information in the annual return but we’re finding that firms are not understanding the high-risk client categories, and what they need to include in the annual return, resulting in both under- and over-reporting.”

If a firm incorrectly identifies clients as high risk, then it might be putting itself into a risk category that it doesn’t have to be in. “About 40 to 50% of the firms we’ve called have made errors on the annual return that have therefore inaccurately increased their risk profile,” says Price.

Grab the opportunity

Firms selected for a telephone review will receive a detailed questionnaire a couple of months before the call. “We ask them to fill this in and submit some supporting paperwork,” explains Price.

The required paperwork, which has to be received one week before the scheduled call, includes:

  • examples of customer due diligence for existing and new clients
  • the firm’s compliance review
  • the firm-wide risk assessment
  • details of AML training
  • information about any suspicious activity reports (SARs) submitted
  • AML policies and procedures

Once the QAD reviewer has looked through the submitted documents, they will call the firm to talk through the documentation, find out more about specific issues if necessary, and ask and answer any relevant questions.

At his firm, Gregory generally found the review straightforward to prepare for and felt there was plenty of time to get together the required documents. “It was clear what was needed,” he says. “Of course, we’re all busy with client commitments and other things, so there was a time element to pulling the information together and getting it in the right format to send over. But overall it was straightforward.”

He does, however, have one tip for firms preparing for a review. “Kevin Sharman, our QAD reviewer, made time for us to ask him questions and bounce things off him,” he explains. “So I would say, take advantage of that: make the most of the opportunity to get feedback and advice. Before the call, think about, and prepare, some key questions you want to ask.”

Where things go wrong

Findings from the AML reviews carried out so far can offer firms a unique insight into where they might need to improve their processes and procedures. The findings can also help make sure they get assigned the correct risk score.

One very common mistake is that people have misunderstood what high net worth means. For AML purposes, high net worth is a client worth over £20 million. “But some firms aren't looking at the criteria and are not reading the guidance,” she explains. “They might have 10 clients worth £2 million, and then they include those 10 clients on the annual return. So we then think they've got 10 clients that are each worth over £20 million, which raises their risk level unnecessarily.”

Firms make similar mistakes over the definition of PEPs and which countries are included in the UK’s high-risk jurisdictions. “The information and guidance is all out there,” emphasises Price. “So firms need to read it, understand the criteria and get their responses right.”

SARs, and when to make them, is something else that regularly comes up in reviews. “We find many firms are still unsure when to make a SAR,” says Price. “This issue came up in almost every review last year. We had to tell firms where to get guidance on SARs because most of them weren't aware of that.”

Positive experience

“The key thing for our firms is to recognise risk when they see it,” concludes Price. “And I don't think all of them are, which is where these reviews can be so useful. It’s a positive thing to be selected, so be as open and honest with the reviewers as you can. And the reviewers will be supportive and come up with some good, practical guidance.”

Gregory’s experience with his firm’s review confirms this. “We got some general feedback and Kevin, the QAD reviewer, put me on to some of the mailing lists, which I'm finding useful in terms of bulletins and updates. He also gave us useful feedback on some new software we’d just invested in to help us monitor AML and client risks. That meant we were able to put in extra manual procedures to cover off some of the software limitations.”

“A lot of practices, and small practices in particular, do all the right things,” he adds. “But we don't necessarily document it in the right way. So you always expect that you might fall down somewhere on the documentation side. But Kevin gave us comfort that we were doing the right things. He is looking at these things day-in and day-out, and he knows the pitfalls and where people are not getting it quite right, so it’s important to make the most of the opportunity.”


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