Money laundering procedures

Within the news updates in the September issue of 'economia', a rather disturbing nugget of information can be found – emboldened in the second paragraph below:

Firms unaware of changes

Firms not carrying out due diligence

48% of firms reviewed do not carry out adequate client due diligence! How can this be? The regulations have been in force in their current form since 2007 and the Consultative Committee of Accountancy Bodies (CCAB) has produced guidance for accounting firms as to what to do to meet their responsibilities.

The weaknesses appear to fall into the following three categories:

1. risk assessment;

2. initial due diligence; and

3. ongoing due diligence

So what should firms be doing?

QAD Master Classes addressed these issues for those who were invited and recent articles on assessing risk for money laundering purposes (Part 1-3) covered some of these areas. Practical guidance on client identification is also provided within ‘5 Customer due diligence’ in the CCAB guidance.

What should members be doing when it comes to money laundering procedures?

The answer is to think through the issues and then record the conclusions and actions taken.

1. Ask yourself what your practice money laundering risk is? This is part of the marketing analysis of the practice which will bring together the skill-set of the partners and staff as aligned to the needs of the target clients in the geographical market in which the practice is based. Formally this would be the SWOT (strengths, weaknesses, opportunities and threats) analysis the practice should undertake as part of its process to develop the business plan. Money laundering issues should feature in the analysis and the money laundering risk facing the practice identified. [ie, the risk that evidence of money laundering is not recognised and reported]
2. Ask yourself what whole firm internal controls have been put in place? These should include staff and principal training, client acceptance parameters and internal procedures for reporting money laundering concerns. Even sole-practitioners benefit from a file note of procedures which could include having a diary note to attend a course providing money laundering update and a note of the money laundering helpline number to contact if they need any money laundering advice.
3. Ask yourself whether there is evidence that client due diligence has been properly considered before every piece of work undertaken. Probably the most useful item on the client file will be a money laundering action checklist. This will prompt not only the gathering of appropriate client identification evidence at acceptance but should also evidence the risk analysis that was undertaken that drove the evidence required, in addition the checklist will require, and evidence, reconsideration of that evidence at the start of each round of work the firm does.
4. Ask yourself when reviewing the file before sign-off whether there is anything arising from the work that gives suspicion of a crime, or proceeds of a crime, and whether appropriate action has been taken?

When questioning why we have to do all this it is important to remember that there is a legal obligation on providers of accounting services to be alert to money laundering. There is a duty to report if we have suspicion of proceeds of crime and failure to report is currently a crime; a most sobering thought.

October 2012