Dirty Laundering Being Aired in Public by the NCA

Monday, July 13, 2015

The National Crime Agency (NCA) makes no bones about it; an eye-watering amount of money is being illegally laundered through UK banks and finance professionals, and “the scale of the laundering of criminal proceeds... is a strategic threat to the UK’s economy and reputation.” In this feature we look at the findings of the recent NCA report, identify how the CPAA can help, and highlight some of the anti-money laundering guidance from HMRC.

 

The organisation warns that despite the UK’s role in developing international standards to tackle money laundering, the measures are inadequate and the same laundering networks used by organised crime are being used by terrorists as well. Far from being a niche issue, the sheer scale of the problem and volume of funds involved represents a threat to our national security. And as an industry, we must take it seriously.

There are three stages of money laundering, all of which are prosecutable. Accountants can – either consciously or unwittingly – become involved at any point in this journey. The first stage is ‘placement’, as criminal money finds its way into the financial system; ‘layering’ involves moving money through transactions (often via offshore companies); and finally ‘integration’ is where the money becomes absorbed into the economy, often through property purchases.

Undermining the industry

While in an extremely slim minority, some practitioners actively enabling money laundering. The NCA recently published a report entitled ‘National Strategic Assessment of Serious and Organised Crime 2015’. It states: “Some Accountancy Service Providers facilitate money laundering and sometimes act as active members of a criminal group or provide consultancy to one or more groups. This sector is one of the most fractured in terms of membership of professional bodies, making compliance with the Money Laundering Regulations of 2007 more difficult to enforce.”

So at worst, there are rogue accountants at the heart of the problem, but what is also of concern is the ‘passive’ practitioners: those who turn a blind eye, or are unsure or anxious about reporting anything irregular. In the NCA’s Suspicious Activity Report of 2014, it was revealed that accountants and tax advisors made 4,930 reports that year – but worryingly these only represented 1.39% of the total reports made, and it was a sharp fall of 9% on the volume reported the previous year.

The NCA warned: “Whilst the vast majority of such professionals have high standards of integrity, they are undermined by others who may undertake criminal activity, are wilfully blind to the nature of their ‘customers’ or are simply careless.”

Fighting the problem

The figures speak for themselves: there is a huge problem, yet fewer accountants are reporting it. As an industry, we have to be vigilant, committed to ethical practices, take an active role in stamping out illegal activity, and act when there is a reasonable cause for concern. The NCA says: “our response must be both resourceful and relentless.”

It’s an issue that can only become increasingly prominent. London Mayoral candidate, David Lammy, has commented on the issue and pledges to take no prisoners if elected. “I am particularly concerned that London’s inflated property prices are fuelled by dirty money and I will do everything in my power to ensure that money laundering and tax evasion are rooted out by the authorities.”

There is no passing the buck in a practice. All individuals working in an accountancy business have a personal legal responsibility to report any knowledge or suspicion of money laundering. Educate team members on what to be aware of, conduct client due diligence, ensure everyone knows the procedure for reporting suspicious activity, and stay on top of industry developments via training programmes – such as those offered by the CPAA.

How the CPAA can help

The CPAA remains committed to keeping members informed about anti-money laundering. It is a regular theme in the Association’s national seminar programme. Last month respected insolvency and business rescue practitioner, FA Simms & Partners, was a guest speaker and covered the topic. Seminar attendees were taken through customer due diligence, risk assessments and reporting.

Anti-Money Laundering Compliance Company (AMLCC) software is provided by the CPAA as a member benefit and therefore members with a CPAA practicing certificate have the subscription paid by the organisation. This entitles them to subscribe to the system which gives them Firm access plus 1 MLRO and 3 Staff members. The product enables them to risk assess their clients, have access to training for the MLRO and staff and also Client Verifications (on a pay as you go basis).

Another valuable source of information is the CPAA’s online training portal. A partnership with 2020 Innovation means that CPAA members have access to hours of CPD material, including the latest anti-money laundering training modules, enabling them to be fully informed and therefore a step ahead.

Bill Annand, Chairman of the CPAA, concludes: "I would remind the members that they have a legal obligation to comply with all aspects of the Money Laundering Regulations and to this end I would urge them to enrol with the AMLCC product which is available to the at no cost. I would also encourage them to register with the National Crime Agency to allow them to make a Suspicious Activity Report.

“I am conscious that our responsibilities as professional body are to offer the best advice and tools to protect the public interest. By using AMLCC and registering with the NCA you will only increase your credibility with the regularity bodies. With so many constraints and legal loopholes you, the member, must be seen to be complying with the law."

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Guidance from HMRC on anti-money laundering controls and monitoring:

Certain controls must be put in place to prevent your business from being used for money laundering. These include:

  • Assessing the risk of your business being used by criminals to launder money
  • Checking the identity of your customers
  • Checking the identity of ‘beneficial owners’ of corporate bodies and partnerships
  • Monitoring your customers’ business activities and reporting anything suspicious to the NCA
  • Making sure you have the necessary management control systems in place
  • Keeping all documents that relate to financial transactions, the identity of your customers, risk assessment and management procedures and processes
  • Making sure that your employees are aware of the regulations and have had the necessary training.

How to report suspicious activity:

  • You need to appoint a money laundering reporting officer
  • Your nominated officer must be told if anyone in your business knows or suspects that another person is laundering money or financing terrorism
  • The nominated officer then has to review the information and decide if it needs to be reported to the NCA
  • Once the nominated officer decides there are reasonable grounds to suspect money laundering they must tell the NCA at the earliest possible opportunity
  • The nominated officer should get consent from the NCA to complete the transaction.
  • If it’s not possible to delay the transaction to get consent, the nominated officer should inform the NCA of this when they send their report.