AML Awareness - Overall responsibilities
We have already looked at what money laundering is: this article looks at the anti-money laundering regime in the UK, and in particular how it applies to accountants working in the regulated sectors.
The law on anti-money laundering (AML) is contained in two main pieces of legislation – the Proceeds of Crime Act 2002 (POCA) and the Money Laundering Regulations 2007. For accountants in practice, there is also guidance from the Consultative Committee of Accountancy Bodies issued in 2008. Between them, they amount to 505 pages, so here is a summary of your basic responsibilities as an accountant.
The provisions that apply to you will depend on whether you work in industry or practice; what your job is; and how senior you are, but you should be aware of the whole process and make sure that you are familiar with your personal responsibilities.
Who does this guidance apply to?
This applies to any business or individual who acts in the course of a business carried on by them in the United Kingdom as an auditor, external accountant, insolvency practitioner or tax adviser. In other words, it applies to anyone working in an accountancy practice.
It is not addressed to independent legal professionals, even where they are acting as tax advisers, insolvency practitioners or trust or company service providers. Independent legal professionals should refer to Guidance issued by their professional body.
CAs working in other regulated areas are also required to comply with the legislation and should follow the guidance issued by any relevant trade body. Those other regulated areas are:
Credit and financial institutions
Trust or company service providers
High value dealers
CAs who are principals in any such business, and who do not hold a practising certificate from ICAS for that activity, should note that they will not be supervised by ICAS for AML purposes. If the industry has an appropriate supervisory body then they will be required to register with that body. HMRC is the default regulator for trust and company service providers and high value dealers.
Members not working in the regulated areas have no mandatory requirements to report knowledge or suspicions of non-terrorism-related money laundering, but DO have an obligation to report knowledge or suspicions of terrorism-related money laundering under separate terrorism legislation. In such situations, members should have regard to any policies and procedures which their company has in place, such as whistleblowing policies.
There is also the option of reporting concerns via the general Action Fraud website. In addition, as we covered previously [link to Monday], it is a criminal offence for anyone not to report knowledge or suspicion of someone committing a serious offence that they come across in the course of their business.
Basic responsibilities of a regulated business entity
There are four things that such an entity should do to comply with their obligations:
Appoint a Money Laundering Reporting Officer
The role of the Money Laundering Reporting Officer (MLRO) carries significant responsibility and should be undertaken by an appropriately experienced individual. Although there is no prescribed level of seniority, one of the principals of an accounting firm, or similar in other businesses, is likely to be suitable, or another senior and skilled person with sufficient authority to enable decisions to be taken independently. MLROs are required to consider internal reports of money laundering, decide if there are sufficient grounds for suspicion to pass those reports on to the National Crime Agency (“NCA”) in the form of a Suspicious Activity Report (“SAR”), and, if so, to make that SAR; and act as the key liaison point with the NCA http://www.nationalcrimeagency.gov.uk/ and law enforcement agencies including dealing with consent and disclosure issues. An MLRO’s responsibilities are discussed more fully here.
Have AML policies and procedures in place
All regulated businesses must have appropriate policies and procedures for assessment and management of the risk of the business being used for money laundering, or failing to recognise it where it occurs, and to report it when required. Policies and procedures are discussed more fully here.
Ensure everyone is properly trained
All relevant employees should be made aware of the law relating to money laundering and terrorist financing and regularly given training in how to recognise and deal with transactions which may be related to money laundering or terrorist financing. In considering a training plan, businesses need to keep in mind what they are trying to achieve which is to create an environment effective in preventing money laundering and which helps protect individuals and the business.
Know who your clients are
Customer due diligence measures are a key part of the anti-money laundering requirements. They ensure that businesses know who their clients are, ensure that they do not accept clients unknowingly which are outside their normal risk tolerance, or whose business they will not understand with sufficient clarity to be able to form money laundering suspicions when appropriate. If a business does not understand its clients’ regular business pattern of activity, it will be very difficult to identify any abnormal business patterns or activities. In addition, businesses must be in a position to supply the client's identity to the NCA should that client become the subject of a SAR. Regulation 7(3) requires customer due diligence measures to be carried out on a risk-sensitive basis. This means that businesses need to consider how their risk assessment and management procedures (see above) flow through into their client acceptance and ID procedures, to give sufficient information and evidence, in the way most appropriate to the business concerned.
Basic responsibilities of individuals working in the regulated sector
As individuals, there is are two things you must do to stay on the right side of the law:
Report suspicions of money laundering
Individuals in the regulated sector commit an offence if they fail to make a disclosure in cases where they have knowledge or suspicion, or reasonable grounds for suspicion, that money laundering is occurring. A person discharges that responsibility by making an internal report to the entity’s MLRO. If convicted of failing to make a report when you should, you could face up to five years’ imprisonment and/or an unlimited fine.
Say nothing – don’t tip off
The criminal offence of tipping off in s333A POCA arises where a person in the regulated sector discloses either:
(a) That a disclosure has been to an MLRO or to NCA and the disclosure is likely to prejudice any investigation that might be or
(b) That an investigation into allegations that a money laundering offence has been committed is being contemplated or is being carried out, and the disclosure is likely to prejudice that investigation. A tipping off offence will not be committed if the person did not know or suspect that the disclosure was likely to prejudice any investigation that followed. The penalty for this offence is a maximum of two years’ imprisonment and/or a fine. There are a number of exceptions to this prohibition on revealing the existence of a report or an actual or contemplated investigation. So if you make a report to your MLRO or to the NCA – keep quiet about it!