Money Laundering - the New Obligations
June 2003. As money laundering regulations are tightened, John Davies offers some timely advice on complying with these changes.
Later this year the scope of the UK’s anti-money laundering regime is due to be extended substantially, imposing on all external accountants, auditors, insolvency practitioners and tax advisers a responsibility to look out for and report suspicions and evidence of money laundering.
The regulations derive from the enactment in 2001 of the EU’s Second Money Laundering Directive, legislation which now needs to be incorporated into national law.
Many firms which to date have remained outside the scope of the statutory regime will have “shadowed” the responsibilities already imposed on firms which give discrete investment advice. For those who are encountering the anti-money laundering regime for the first time, though, the scope of their new responsibilities may come as an expensive shock.
Money Laundering Officer
All regulated individuals and firms will need to take appropriate measures to ensure that their staff are trained to recognise and deal with transactions linked to money laundering. They will also have to put in place effective internal control procedures which must, in particular, involve the appointment of a “money laundering officer”.
Where the latter concludes that a particular matter does indeed give rise to knowledge or even a suspicion of money laundering, the matter must be reported. Failure to do so will be punishable by a fine and/or imprisonment of up to two years.
The Second Directive targets several likely candidates for attention in this context, such as casinos, estate agents and dealers in high-value goods such as jewellery and works of art. The Directive also requires that national law brings within the scope of regulation “auditors, external accountants and tax advisers” (insofar as they are acting in the course of their professional activities).
DTI Approach
Insolvency work, not being a regulated activity elsewhere in the EU, is not specifically covered by the Directive. The DTI, however, proposes to apply the regulations expressly to any person who acts as an insolvency practitioner under the Insolvency Act 1986.
Non-RPB Accountants
The adoption of this approach will mean that the anti-money laundering regime will reach out to all accountants in public practice – not just to CCAB accountants and registered auditors, but to those who offer limited bookkeeping and accounts preparation services and who are members of currently unrecognised bodies or even of no body at all.
Imposing new obligations on accountants who are already closely regulated by their professional bodies will not prove problematic to the Government. It will be able to rely on compliance with the new regulations being assessed as part of RPBs’ well-established monitoring procedures.
Extending the scope of the money laundering regime beyond the RPBs will, however, present difficulties to the Government. The possibility of setting up a brand new regulatory body for this purpose has been floated, but has been understandably frowned on because of its cost.
A more likely alternative is to allocate new responsibilities to monitor compliance with money laundering obligations to a body such as Customs & Excise.
However the situation of the non-RPB accountants is eventually dealt with, it must be right that efforts to close loopholes in this area encompass all avenues which may be exploited by criminals. Therefore, if accountants are to be covered by the new regime then they should all be covered, not just those who have particular qualifications.
The challenge for the Government is to ensure that compliance with the new regime is achieved across the board and not just by firms which are already subject to extensive regulatory controls. ACCA has argued these points strongly in its representations to the Government and is optimistic that it will take heed.
The new regulations are likely to be published in June and to come into effect in September.
Technical Factsheets
Technical Factsheet 85 – Anti-money Laundering (Proceeds of Crime and Terrorism): interim guidance for accountants published 05/03 by CCAB
Technical Factsheet 86 – Anti-money Laundering Guidance for Accountancy Practices
(download from www.accaglobal.com or tel: 020 7396 5900 to order)
CPD Seminar
Money Laundering – Monday 30 June (16.00–19.00), London, £55 + VAT, tel: 020 7396 5910 to book
ACCA’s Website (www.accaglobal.com) has the following useful information:
- a booklet entitled Money Laundering – Prevention and Compliance 2001/2002
- ACCA’s Rulebook 2003 includes guidance on relevant regulations
- past issues of In Practice contain articles about money laundering
Other Useful Websites
- National Crime Intelligence Service
www.ncis.co.uk/ec.asp - Joint Money Laundering Steering Group
www.jmlsg.org.uk/ - The Home Office
www.homeoffice.gov.uk/crimpol/oic/proceeds/purpose.html - Financial Action Task Force on Money Laundering
www1.oecd.org/fatf/
John Davies – ACCA Head of Business Law, ACCANew Money Laundering Regulations – Sources of Further Information