Anti-money laundering

This short video should help all eligible firms to comply with AML legislation, by giving pointers and tips on how to use the freely available ICAS General Practice Procedures Manual.

In UK law, money laundering is defined very widely, and includes all forms of handling or possessing criminal property, including possessing the proceeds of one's own crime, and facilitating any handling or possession of criminal property. Criminal property may take any form, including in money or money's worth, securities, tangible property and intangible property.

Money laundering can be carried out in respect of the proceeds of conduct that is an offence in the UK as well as most conduct occurring elsewhere that would have been an offence if it had taken place in the UK.


Latest News

Updated guidance for Money Service Businesses

HM Revenue & Customs have released updated Anti Money Laundering Guidance for Money Service Businesses. The updated guidance, which is produced in accordance with the 2007 Money Laundering Regulations

FATF Jurisdictions of Concern

The UK government has released its latest information on jurisdictions with anti money laundering and Counter financing of terrorism system weaknesses.

Law set to change for "professional enablers"

The Government has outlined plans to strengthen its powers to punish professional advisers such as accountants and lawyers who "turn a blind eye" or use their professional status to facilitate the transfer of criminal property. The new offence of "participation in an organised crime group" which was outlined in the Queen's speech, sees a maximum sentence of 5 years for professionals who are found to be complicit in their clients' wrongdoing.

Beneficial ownership plans set out

The government has set out plans for a central public register detailing company ownership information. The government is intending on requiring that companies hold information on all individuals who own or ultimately control more than 25% of a company's shares or voting rights. Companies will be required to list details on these beneficial owners including full names, date of birth, nationality, address, details of the beneficial ownership and how it is held. The information will be held at Companies House and newly incorporated companies will also have to make an initial statement of beneficial ownership on incorporation.

Hillgrove PR Case

The recent tax fraud case involving Richard Hillgrove, a PR Consultant with several high profile clients, is of significant relevance to accountants. His company, Hillgrove Public Relations Limited, had avoided paying VAT totalling £52,000 and PAYE totalling £43,000. The money was spent on luxury items such as flowers and hotels. Hillgrove also owed taxes from a Limited Liability Partnership, RJH Management, a business he had operated with his wife. One of the main pieces of prosecution evidence on which the case hinged was a suspicious activity report (SAR) submitted by his former accountant. This SAR was picked up by HMRC, who were already investigating Hillgrove. 
What is unusual about this case is that the contents of the SAR were actually directed to be disclosed in court by the judge, since one of the defences put forward by Hillgrove was that HM Revenue & Customs (HMRC) and his former accountants were involved in some sort of collusion to bring about his downfall. Michelle Bishop, partner at Bishop Fleming, was involved in Hillgrove's affairs from November 2010 to January 2012. She was summoned as a witness and asked in detail about her firm's relationship with Mr Hillgrove and the basis of her SAR.
There are two points here:

1. The disclosure of the contents of the SAR and subsequent cross examination of the submitter will prove as something of a warning to accountants to make sure that they get the procedural side of things correct when they find themselves in a situation where they need to report to the National Crime Agency.

2. Hillgrove was a headstrong and potentially morally dubious individual. Accountants who become involved with clients of this type should not forget their ethical duties and also their duties under the Proceeds of Crime Act 2002. 
It is not yet clear whether Hillgrove will appeal the court ruling but if he does we will of course keep you informed of this and any further ramifications that may impact practitioners.

Ukraine Unrest – risk of corrupt asset flight

The recent political unrest in the Ukraine has raised the risk of corrupt asset flight. Firms and financial institutions are therefore to be reminded of their duties under the Money Laundering Regulations and the Proceeds of Crime Act. Corrupt asset flight may be facilitated through companies and other legal arrangements, or other transactions designed to quickly liquidate assets held in the UK.  Robust beneficial ownership checks by firms are therefore vital. Firms who have clients with links to the Ukraine should consider this potential increased risk when performing due diligence, ongoing monitoring and beneficial ownership checks.  View the FCA press release.

Consent Requests Guidance Released

The National Crime Agency has released its annual guidance note on consent requests in the Accountancy sector.  This publication gives some useful insight into the main issues around consent and what reporters should be aware of when applying for consent. 

Sanctions Information Changes Location

The location of UK Financial Sanctions information has now changed and is no longer on HM Treasury's website (it has now moved to .gov.uk). Information on the latest jurisdictions affected by United Nations, European Union and UK sanctions is available on the gov.uk website

Information on high risk and non-cooperative jurisdictions and equivalence can still be sourced on the website of the Financial Action Task Force.

With the changes in the anti-money laundering regulatory environment in recent times, a number of the requirements have resulted in common queries from accountancy firms, primarily in relation to client identification procedures, client engagement procedures, staff training and reporting requirements.

A number of queries have been published in the ICAS CA Practitioner Service's bi-monthly Technical Bulletin, and are categorised below. Click the titles below to view sample queries and answers from each category as well as links to each list of queries.


Official Guidance 

CCAB - Anti-money laundering guidance

The Guidance issued by the Consultative Committee of Accountancy Bodies has received the approval of HM Treasury. Guidance which is approved by Treasury is 'relevant guidance' within the meaning of the
Money Laundering Regulations 2007. Courts must consider relevant guidance when determining whether an accountant's conduct gives rise to certain offences under either the Proceeds of Crime Act 2002 or the Money Laundering Regulations 2007. It is this guidance which practitioners should consider as authoritative when implementing and complying with anti-money laundering requirements. The Guidance provides the accountancy sector with not only an interpretation of the requirements of the Money Laundering Regulations 2007 (as amended) and primary legislation relating to money laundering and terrorist financing but also practical guidance on good practice for matters not prescribed in law.

Download CCAB AML Guidance

JMLSG Guidance

The Joint Money Laundering Steering Group's (JMLSG) latest guidance, in relation to money service businesses, has received ministerial approval.

View Latest JMLSG guidance

Customer Due Diligence

Query: If we were to take on a new client who has at one time been in prison, would there be anything extra, money laundering-wise, that we would need to do?

Answer:This comes down to the firm's assessment of risk and its policy of due diligence across the risk categories.

You would have to consider the reason why the potential client had been in prison. If, for example, he simply got into a fight leaving a nightclub or whatever, it is unlikely this would cause any additional risk. However, if he were jailed for fraud, extortion, drug running, living off immoral earnings or similar that would certainly put him in a high risk category.

In the latter situation, the firm's procedures for high-risk category clients should be utilised. Of course, again dependent on the nature of the crime, the firm may wish to consider whether it wants such a person as a client at all, regardless of any money-laundering obligation.

More details on applying customer due diligence procedures can be found in our downloadable List of Customer Due Diligence Queries.

Customer Due Diligence Queries PDF [223 KB]

Reporting

Query:  We have recently prepared accounts to 31 March 2012 for a new client and submitted these and the returns to HMRC. Since then, we have become aware of undisclosed payments made to the client (as a result of accounts work performed for another of our clients). The VAT due on these payments has not been paid to HMRC. Obviously these payments did not come to light when we were preparing the accounts and the client made no mention of them.  In addition, we have subsequently discovered that the client has arrears of tax from previous years, suggesting that this omission is not just an oversight. Given that we believe that the accounts and tax returns deliberately understate the profits and tax liability, what action should we take? 

 Answer: The action taken is really dependent on whether you believe that the client has deliberately concealed the transactions or whether you believe that it is an innocent error. If you consider that it is an error, you should speak to the client and discuss what can be done to address the matter. If the client is happy to go ahead with this process, and you feel that the reason for the mistake is reasonable, then there is no need to report to Serious Organised Crime Agency (SOCA). 

If, as you suggest, you believe that the client has deliberately concealed transactions, then you must report this matter to SOCA. Despite this, you do not necessarily need to resign and you may wish to bring the issue up with the client. The client may then agree to correct the error (this will not invalidate your previous report to SOCA). If the client does not agree to correct the error, however, then you must resign and write to HMRC, informing them that previous returns submitted by you for this client cannot be relied upon (to say any more would be a breach of confidentiality).

If the client agrees to adjust, but you still feel that they are not being 100% honest with you, again you must resign. Finally, if the client adjusts and you are satisfied that these accounts are correct, you can continue to act. Unless the client has a good explanation for the omissions, you should be considering your risk assessment for this client and looking carefully at the accuracy of returns in subsequent years and the completeness of information being provided by the client.

More FAQs can be found in our downloadable List of Reporting Queries.

Reporting Queries PDF [207 KB]

Training

Query: I run a small practice and sometimes use staff from agencies or subcontractors to assist me in busy periods. Do I have to make sure that they are suitably trained in money laundering issues? 

Answer: The simple answer is yes. Not only will you have to ensure that they are trained in and aware of your firm's own procedures but you should ensure that they understand what money laundering is and how to identify it. You should be ascertaining what training they have had and whether there is adequate proof that this has been undertaken. In particular you should be ensuring that the individual's training has been recent. Always ask individuals who are new to the firm of their experience in this area and if necessary arrange training for them, whether it be by external or internal courses or online training. Whatever the training, remember to retain evidence of this.

It is important to note, that subcontractors who provide these sorts of services (i.e. accountancy service providers), should now be registered with HMRC (unless already registered with a professional body). However, if the subcontractor is working for a firm who is monitored by a recognized supervisory body and he or she does not contract with the end client, is included within their client's anti-money laundering procedures, and there is a contract between the two businesses expressing these facts then there is no need to register with HMRC. Of course, if the subcontractor has any clients not regulated by a recognised supervisory body, then he or she should register with HMRC. These businesses must therefore ensure that they comply with the Money Laundering Regulations 2007 and also have risk based anti money laundering controls in place.

More FAQs can be found in our downloadable List of Training queries.

Training Queries PDF [86 KB]

Other

 Query: I have heard that where the police have been unable to prosecute a criminal case successfully, it can refer this to the Serious Organised Crime Agency (SOCA) who can take further action. Is this true? 

 Answer: Yes. Where a law enforcement agency or prosecution authority has a criminal case which it has been unable to prosecute successfully, it can refer the case to SOCA for consideration for civil recovery or tax action if it meets the following criteria:

  • recoverable property has been identified and has an estimated value of at least £10,000;
  • recoverable property has been acquired in the last 12 years (20 years for tax);
  • recoverable property includes property other than cash, cheques and the like (although cash can be recovered in addition to other property);
  • there is evidence proven to civil standards of criminal conduct;
  • for tax cases there must be reasonable suspicion that untaxed income has resulted from criminality.

More FAQs can be found in our downloadable List of Other Queries.

Other Money Laundering Queries PDF [130 KB]

Topics

  • Anti Money Laundering

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