Category: Professional Bodies

Guidance and news from the Supervisory professional bodies

  • CCAB issues a reminder for practitioners to stay vigilant over money laundering

    Staying safe within the money laundering regulations

    With the latest budget heralding a clampdown on tax evasion, accountants in practice would do well to consider the first-aider’s rule when acting for clients.

    Ask any first aider about helping others and the first rule is: don’t put yourself in danger when trying to assist others. Think and check before jumping in the water to save the drowning man.

    An accounting service provider (practitioner) is subject to the money laundering regulations, which impose obligations of diligence and reporting on the member – where failure to comply can lead to criminal proceedings against the practitioner.

    Test the water before entering

    The first-aider would look at the water and assess his competency as a swimmer given the turbulent nature of the water. Are these choppy waters too great a risk? For the practitioner, this means that he has to consider his competence in the first instance by assessing the skills and experience he needs to deliver the service the client wants.

    Know who you are dealing with

    Although this may sound odd, the second thing the first-aider does is communicate and fact-find in order to assess the situation. This may have a bearing on how, or even if, the first-aider can assist.

    In money laundering terms this means knowing your potential client, and if it is an entity, then finding out who is behind it and who is taking the benefit from it. Making sure you have a record of that evidence is very important – and your only proof you have complied with the regulations.

    Watching for rocks and sharks

    The first-aider is ever alert to their surroundings and the changing circumstances to ensure they can react and adapt the rescue plan in order to manage the danger to them or the person they are trying to help.

    For the practitioner this means being alert for unusual events and transactions or results that implicate the client as perpetrator, facilitator or victim of a crime. The practitioner needs to ensure and evidence that all staff are trained in money laundering and that all suspicions are reported to the money laundering reporting officer (MLRO) who will make the decision whether to report to the National Crime Agency. Does the MLRO who receives no reports have poorly trained staff, rather than really safe clients?

    In addition, the initial client due diligence has to be refreshed each assignment and any changes to the evidence that is relied upon should be recorded. Where is the documentary support that this is still the most appropriate ongoing due diligence? A note confirming consistency with current file data each year should be made.

    Dialling 999

    The first-aider should dial 999 before entering the water but may not – and would assess the condition of the person in the water to see whether it was warranted.

    The reporting obligation imposed on the practitioner on the other hand is a bit more complex and onerous since it is a crime to fail to report. So when should the practitioner report? The regulations provide that the practitioner must report if, during the course of his business as an accounting services provider he becomes suspicious of there being a crime with proceeds.

    Professional scepticism should prevail. While he is not obliged to do anything extra as part of the money laundering regulations, he is required to be aware of the potential for money laundering or terrorist financing. That involves keeping an eye on the transactions during the course of the work and ensuring that they appear consistent with what he would expect to see, given the knowledge of the client.

    These transactions might, for example, involve the client’s staff stealing from the client, or some sort of tax evasion.

    Reports to the MLRO should be monitored and the decision whether to report documented. Where no report is made, this situation is monitored going forward in order to react, should further evidence come to light.

    A cry for help with a nasty twist

    Where the client comes to the practitioner to say “I’ve done wrong” (perhaps they have not  declared income which is in an undeclared overseas account), and “what do I do?” (seeking advice as to what to do under the law in order to regularise their affairs): does the practitioner help the client and still report them or does he apply the privilege reporting exemption?

    This is not the legal privilege we generally think of but a special privilege under the money laundering regulations. It is important to get legal advice confirming the position before taking the decision to report or not.

    If in doubt, seek advice from your professional body.

    In summary: you should:

    • know your client and their business;
    • appoint a MLRO and train your staff as to their obligations;
    • record and monitor evidence of the client’s identity;
    • monitor money laundering identity evidence and reporting to MLRO; and
    • record evidence of the MLRO decisions to report or not.

    To discuss your money laundering obligations, contact your professional body.

    You may also consider investing in a package of AML technical resources and/or attending further CPD on the subject.

  • SmartSearch Gains ICAEW Affinity Statue

    ICAEW Member Rewards Partnership

    SmartSearch are the preferred supplier of KYC and AML solutions for the Institute of Chartered Accounts England & Wales, we work with many of the largest Accountancy Firms, providing a total solution for Accounting Firms for Know Your Customer and Customer Due Diligence.

    Business & Individual AML Verifications on a single Platform

    SmartSearch is the only AML Platform of its type where you can perform both Business and Consumer AML checks. Other unique features include email alerts to MLROs when Sanction, PEP or SIP matches are encountered; also included is ongoing monitoring of all enhanced client records.

    The award winning SmartSearch software platform delivers both Business and Individual AML verification services providing major reductions in red tape bureaucracy, time and cost for Client Firms. A Business AML check can be completed in less than 3 minutes, with Individual checks taking as little as 30 seconds. Neither of these processes require documents to be supplied by customers so you can get on with the business of servicing your clients from day one.

    SmartSearch’s Principal Data Partner is Experian providing SmartSearch with access to over 1 billion data items to enable our positive AML verification process. Dow Jones provides SmartSearch with their “Watch List” to enable negative screening of Sanction and PEP checks. SmartSearch updates this Watch List daily which further enables our daily monitoring service.

    ICAEW Affinity

    The SmartSearch has recently been chosen as the Affinity Partner to provide electronic Anti-money Laundering (AML) Verification for the ICAEW. As a consequence of this partnership we have special discounted pricing arrangements for ICAEW Members, simply quote your membership number to us to qualify for this.

    ICAEW Infinnity Logo

  • OFT fines Leicester-based estate agent almost twelve thousand pounds

    The OFT, in its first formal Regulatory penalty, has fined Leicester-based IPS Estate Agents Limited £11,844 for failing to comply with anti-money laundering regulations.

    IPS failed to comply with a number of requirements under the Money Laundering Regulations 2007, including those relating to:

    • verifying the identity of customers
    • keeping appropriate records
    • ensuring that relevant staff are aware of the law relating to money laundering and terrorist financing
    • establishing and maintaining appropriate, risk-sensitive policies and procedures.

    The failures relate to the period between March 2010 and October 2011. The OFT visited IPS premises to check compliance with the Regulations in June 2011 and again in October 2011.

    From the scope of the failures for almost all major areas of compliance to the Regulations you can almost conclude that virtually no compliance of any weight was conducted by the firm with no appropriate management policies and procedures for risk management and the subsequent communication and training of any policies to staff members to fulfill their obligations.

    Kate Pitt, OFT Deputy Director of Anti Money Laundering, said:

    ‘This fine sends out a message to all estate agents that they need to have appropriate measures in place to prevent their business from being used for money laundering or terrorist financing purposes.’

  • Coutts fined for failings in money laundering controls

    Private bank Coutts has been fined £8.75m by the Financial Services Authority (FSA) for not taking adequate measures to prevent money laundering. The FSA said the failings “resulted in an unacceptable risk of Coutts handling the proceeds of crime”.

    The findings related to high-risk people, especially those whose political positions meant they were vulnerable to corruption. Coutts clients include the Queen, pop stars and sports personalities. It is owned by Royal Bank of Scotland.

    Coutts agreed to settle at an early stage in the process. It said it was confident that its anti-money laundering processes were now robust.

    “Since the FSA first raised its concerns, we have implemented a number of improvements to prevent any recurrence of these failings,” said Rory Tapner, chief executive of the wealth division of Royal Bank of Scotland. “We remain committed to ensuring that our systems and controls are robust and counter the risk of financial crime in all the markets in which we operate.”

    The fine followed the FSA’s visit to Coutts in October 2010 as part of its review into how banks were managing situations in which there was a high risk of money laundering. The regulator said that Coutts had failed to check the source of funds when prospective new clients tried to open accounts. It also failed to check up on any intelligence about its existing or prospective clients and had not kept information on those clients up to date.

    The FSA said there had been deficiencies in nearly three quarters of high-risk customers’ files.

    “Coutts’ failings were significant, widespread and unacceptable,” said Tracey McDermott, the FSA’s acting director of enforcement and financial crime. “Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.”

  • ICAEW Disciplinary Consent order made on 3 October 2011

    The followng consent orderwas made by the ICAEW investigation committee

    With the agreement of Richard Braysher of 2 High Road, Eastcote, Pinner, Middlesex, HA5 2EW, the Investigation Committee made an order that the member be severely reprimanded, fined £5,000 and pay costs of £1,280 with respect to a complaint that:

    1 Between 28 September and 3 March 2010 Mr Braysher failed to comply with written assurances he had given on or about 28 September 2006 following a Quality Assurance Visit that he would:

    Under the Money Laundering Regulations 2007:
    a. have procedures in place to perform on-going client due diligence;
    b. attend external training on the money laundering regulations and;
    c. undertake a compliance review.

  • Former ATT President Charged With Tax Fraud

    Former ATT President
    Former ATT President
    Andrew Meeson, the former President of the Association of Taxation Technicians and three of his business associates who administered a pension scheme, have been charged with stealing £5million through a tax fraud targeting the pension industry.The four – three men and a woman – were arrested last year in dawn raids carried out by HM Revenue & Customs (HMRC) investigating an alleged multi million pound fraud. The raids took place at residential and business premises in the West Midlands, Derby and Leicester.

    Simon De Kayne, Assistant Director of Criminal Investigation for HMRC, said: “Four people have been charged linked to what we believe is a fraud resulting in over £5 million being stolen from public funds. We are committed to bringing such cases to the courts and depriving those involved of the proceeds of their crime.”

    Meeson resigned from his role as president of the ATT last week in order to fight the charges.

    On April 8 2010, the Pensions Regulator took action to suspend Tudor Capital Mgt from acting as trustees from pension trust schemes at the same time HMRC obtained search warrants for the company.

  • 12.05.11 ICAEW Fine Accountant £5,000 for breach

    At a Disciplininary Council meeting a Mr P R Honeywell FCA was found to have failed to comply with Money Laundering Regulations2007 in that, following a practice assurance visit, he failed to:
    (i) document a client due diligence review; and
    (ii) identify clients for whom his firm, Honeywell (Monmouth) Limited, provides payroll services.

    On 18 June 2010 the case manager wrote to Mr Honeywell asking him to provide additional information to address the outstanding issues arising from the visit. These are summarised as follows:

    Details of the steps he has taken to establish the adequacy of the money laundering procedures undertaken by social services on clients that are referred to him and the basis on which he is able to rely on these procedures

    Just before the hearing day, the defendant’s solicitors wrote to the tribunal putting forward various points said to be in mitigation. This included that the Practice Assurance visit had ‘passed’ the defendant’s practice in most aspects and that it was unrealistic to expect the Money Laundering Regulations to apply in relation to clients in receipt of social services funding for their care.

    The tribunal did not view either of these points as mitigation. First, Chartered Accountants can be expected to comply with professional standards and partial compliance does not excuse what amounted to a wilful refusal to cooperate with the ICAEW with regard to the areas of non-compliance. In relation to the Money Laundering Regulations, whilst the defendant’s conduct did not amount to the most serious of breaches, the defendant had failed to show any willingness to engage with the ICAEW on this. Had he done so and discussed how he could carry out a modified version of identity checks and thereby compliance, the tribunal might have been more sympathetic.

    It was the role of the ICAEW to maintain the standards amongst the profession of chartered accountancy. An important part of this is the Practice Assurance. An equally important part of a chartered accountant’s professional standards and indeed the protection of the public, is compliance of money laundering requirements. The defendant had fallen below the professional standards expected of chartered accountants.

    The tribunal ordered that Peter Royston Honeywell FCA be severely reprimanded, pay a fine of £5,000 and costs of £2294

  • 30.11.10 Accountant fined £1,080 for a failure to verify a client

    The ICAEW has made the following regulatory decision in a case for a failure to verify a client in accordance with the Money Laundering Regulations.

    Consent Orders made on 1 June 2010

    With the agreement of Andrew Nigel Hamilton of 38 Dean Park Mews, Edinburgh EH4
    1ED, the Investigation Committee made an order that the member be severely
    reprimanded, fined £2,000 and pay costs of £1,080 with respect to a complaint that:

    In February 2007, Mr A N Hamilton FCA acted for X on behalf of his firm, Y, when he
    had failed to verify her identity or keep records of the evidence obtained, contrary to
    section 18 of the anti-money laundering ‘Second Interim Guidance for Accountants’
    D6448

  • 30.11.10 Accountant fined £5,000 for a failure to report

    The ICAEW made the following regulatory decision in the following case for a failure to make a suspicious activity report in a timely basis

    Consent Orders made on 28 July 2010

    With the agreement of Michael Martin Shenker of 5Wellesley Court, Apsley Way,
    London NW2 7HF, the Investigation Committee made an order that the member be
    severely reprimanded, fined £5,000 and pay costs of £2,075 with respect to a
    complaint that:

    Between 7 June 2005 and 16 February 2006 Mr M M Shenker FCA failed to comply with
    statement 1.304 of the Members Handbook in that he failed to make a suspicious activity
    report on a timely basis to the National Crime Intelligence Service when he had a
    suspicion or reasonable grounds to suspect that Mr X’s activities in relation to the
    business of Y Limited were unlawful. D6496

  • 10.08.10 External consultants cannot act as a Nominated Officer under Money Laundering Regulations

    As an external consultant I am usually in the situation where systems we devise for compliance starts with a simple policy statement, which firstly details who is and how to communicate with, the nominated officer, who will be a senior member of the firm, a director, partner or owner manager.  We remind firms of their responsibilities under the Money Laundering Regulations, It is after all their business and they must accept reasonability for its successful running.

    It does come as no surprise, therefore, that the Financial Services Authority (FSA) has recently censured and banned three directors from acting as senior managers for failing to meet their supervisory standards. The FSA investigation found that the directors had been relying too heavily on external consultants for advice on how to run their business.

    It is equally unsurprising then that HM Revenue & Customs (HMRC) have also announced that they take the same view to the FSA in relation to businesses meeting their obligations under the Money Laundering Regulations.

    HMRC also state that they have no objections to businesses getting advice from external consultants regarding their obligations under the Regulations, as long as the responsibility for complying with the Regulations remains on the business rather than any consultant.

    What does come as a surprise is that some consultants, who should frankly understand the Regulations better, have recently offered their services to act as the Nominated Officer for a business. HMRC has no formally announced that it does not consider that a consultant outside the business can be appointed Nominated Officer for any of the businesses HMRC supervise under the Regulations.