AML compliance doesn't have to be challenging
By Mel Alexander, Amiqus Resolution Ltd
11 June 2019
The United Kingdom is one of the most attractive destinations in the world for money laundering. Mel Alexander from Amiqus explains.
The National Crime Agency estimates £100bn of dirty money is laundered through the city of London alone each year, part of the reason why the agency was established in 2013, with the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) following in 2018.
2018 was also the year when the UK’s first Unexplained Wealth Order was issued. Suspicions were raised after "Mrs A" Zamira Hajiyeva amassed a £16m Harrods bill, invested £22m in London properties and purchased a Gulfstream G550 jet, leading to accusations of conspiracy to defraud the International Bank of Azerbaijan, of which her imprisoned husband was the former Chairman.
The story captured headlines around the world as law enforcement and regulators flexed newly tightened anti-money laundering (AML) legislation designed to make the UK a less appealing destination for money launderers.
The first half of 2019 has been awash with news stories about increased scrutiny of AML measures in the legal, financial services and property sectors as the UK government makes targeting economic crime a priority.
In March, one of the UK’s leading estate agency groups was fined £215,000 by HMRC for failing to ensure its money laundering procedures and record keeping were compliant with regulations. Eight weeks later, the Solicitors Regulation Authority’s initial review of 59 legal firms revealed AML procedures were falling short, with 44% of those firms placed into disciplinary processes. A further 400 firms are now under review.
The fifth money laundering directive: what it means for accountancy firms
As well as an increased focus from regulatory bodies and auditors, upcoming legislative change will impact how firms in regulated markets handle their compliance.
The fifth money laundering directive, due to be transposed into legislation in 2020, mandates the use of electronic identification and verification, stating electronic means should be used ‘where available’ to replace paper-based processes. Moving compliance online is becoming a ‘must have’ rather than a ‘nice to have’.
The perceived challenge of compliance
The most recent practice survey of ICAS members shows that compliance and regulation is rated as the most challenging issue firms face. Coping with the impact of technology on clients, and firm, scored highly too.
The good news for accountancy firms is that easily implementable technology can be used to reduce pressure, for firms of all sizes, in meeting the requirements of AML regulations. Using technology as the solution for client and staff onboarding and compliance doesn’t equate to high costs and lengthy integration projects; it can be as simple as completing checks online, via an internet browser, instead of on paper.
Equally, as client expectations change in light of their evolving data protection rights, adhering to tightened anti-money laundering and data protection standards may soon be a key factor in maintaining existing clients, winning new ones and securing competitive advantage for your firm.
Accountancy firms AML responsibilities
AML responsibilities for accountancy firms can be categorised into three areas:
- risk assessment
- initial due diligence
- ongoing due diligence
Risk assessment
The Money Laundering Regulations 2017 require all accountancy firms to conduct a firm-wide AML risk assessment. Guidance issued by ICAS helps firms understand how to conduct the risk assessment with worked examples and templates available to use.
Initial due diligence
Initial due diligence, completed when onboarding a new client, is designed to ensure firms truly know their client, understand the level of risk presented by the client and dependent on the risk level, whether enhanced due diligence measures need to be put in place.
Enhanced due diligence measures are required for high risk clients. Conditions that present higher risk for money laundering may include, but are not limited to:
- a client who is politically exposed
- a client who you haven’t met face to face
- clients or entities who appear on sanctions lists, or operate in sanctioned countries
- clients who have unnecessarily complex or opaque beneficial ownership structures
- clients with adverse media reports
Ongoing due diligence
The Money Laundering Regulations 2017 moved ongoing monitoring of Customer Due Diligence (CDD) up the priority list, specifically stating that monitoring should be carried out ‘for the duration of the business relationship’. Ongoing due diligence is just as important as upfront and necessitates the need for clear policies and procedures around how often, and in what way, anti-money laundering (AML) checks will be refreshed.
The point of least resistance will always present the largest opportunity for money launderers. Firms failing to implement robust controls are a primary target for financial criminals placing client data, and the firm, at avoidable risk. As the focus on enforcing compliance increases, and with regulatory change afoot, now is the time to put plans into place to make sure your firm, and your clients, are protected.
Your next steps - free webinar
ICAS has partnered with Amiqus ID to provide member firms with a single point of access to the upfront and ongoing compliance checks required for clients and staff. They are offering ICAS members a free AML compliance and technology transition webinar on 20th June.
About the author
Mel Alexander is Head of Growth at Amiqus Resolution Ltd, a tech for good company and strategic partner of ICAS. To learn about how Amiqus ID can help your firm know your client and protect your business visit Amiqus to book a demo.
This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.