GUEST ARTICLE | THE REALITY OF OUR FAILINGS

With an estimated 130,000 people trapped in slavery in the UK, Richard Simms, FA Simms & Partners, asks whether we are all complicit when it comes to money laundering.

The UK has £87.9 billion (amounting to 4.3% of our GDP) laundered through its economy every year. This makes us second only to the US in the amount of criminal funds that pass through our country.

This cannot go on. But currently the UK is losing in the global fight against money laundering. The Transparency International Corruption Perceptions Index ranks the UK in 18th place – an embarrassing four places below Uruguay, a country with a reputation for suppressing freedom of speech, sitting in 44th place for freedom of expression in the rankings of Reporters Without Borders.

The accountancy sector, as with all our other regulated sectors, is a gatekeeper of our country’s economy. Clearly, that role is not being performed nearly well enough.

A hypothetical look at the reality of potential anti-money laundering failings

Modern Slavery estimates that over 130,000 people in the UK are trapped in slavery. As well as criminal industries, these people are in licit sectors like construction, shops, bars, car washes and manufacturing.

If you are completing the right anti-money laundering (AML) checks on your clients, their involvement in this criminal activity might present anomalies. But according to the annual reports from various accountancy supervisors, it appears that only around 15% of accountants are currently doing everything they can to comply with the regulations and taking the matter seriously. Unbelievably, an estimated 15% are still doing nothing at all. The remaining 70% may be carrying out some of the necessary steps and work to be fully compliant but are still not doing everything they should be.

Imagine that one day you get a call or visit from law enforcement. Some of the workers on your client’s construction site have been referred to the authorities as suspected victims of modern slavery. What happens next depends on whether you have fulfilled your AML obligations.

If you are one of the 15% of firms that does everything it can to comply, you’ll have completed all the required AML steps and have a complete audit trail to prove it. If there were no red flags, or if you can show how you mitigated the risks that you did spot, you can hand over the information you have on the client with the peace of mind that you did everything in your power to identify criminal activity.

For the other 85%, the matter is much more serious. Under the current laws, your firm could be fined tens of thousands of pounds and lose its licence to continue in business. However, the Economic Crime and Corporate Transparency Bill, which is going through its final amendments now, proposes that the ‘failure to prevent’ clause makes any business responsible for preventing money laundering. Should this amendment pass, ‘failure to prevent’, which is what you could potentially have done by not fulfilling your AML obligations, brings with it the likely possibility of criminal charges too.

Then you have the ethical issues. I would imagine that any potential involvement in modern slavery, albeit unwittingly, would not sit well with you.

Compliance can be easy

As a regulated professional in the accountancy sector and as an AML expert, I have seen the challenges that firms have with compliance. UK professionals have got to stop seeing AML risk management and compliance as a nuisance and a waste of their time – there is a much bigger picture.

It may seem onerous unless you fully understand what AML really is and why it exists. When you are facing the possibility of your AML processes being put under the spotlight, that may the first time that you analyse what you’re doing and realise that it’s not up to scratch. Often, nowhere near up to scratch.

The Regulations clearly define the AML obligations that all firms are legally required to comply with. To give you an overview:

• Have you appointed appropriate people in your firm’s AML roles?
• Have you trained all employees, agents and senior management on how to recognise money laundering, terrorist financing and proliferation financing, as well as on their legal AML obligations and how to fulfil them?
• Have you carried out a business-wide risk assessment analysing all the potential risks that your business faces and your clients present?
• Are your AML policies, controls and procedures (PCPs) shaped by your business-wide risk assessment so that you can correctly adopt the risk based approach?
• Have you completed the correct client due diligence on every client, including a comprehensive client risk assessment?
• Do you have a complete date stamped audit trail which proves your compliance at any time?

Once you have the right processes in place, AML is much easier to keep up with – more like regular housekeeping rather than a once-a-year spring clean. It will also allow you to minimise the risk of yourself and your firm suffering the severe legal and ethical consequences of becoming unknowingly involved in criminal activities.

If all regulated professionals pull together to fight money laundering worldwide, it will start to work. If you’re not going to properly comply with AML regulations, you are in the wrong industry.

 

Author biography

Richard Simms is the managing director of FA Simms & Partners. Much of his time is spent advising clients with regards to financial problem resolution.

"If all regulated professionals pull together to fight money laundering worldwide, it will start to work. If you’re not going to properly comply with AML regulations, you are in the wrong industry."

Richard Simms, Managing Director of FA Simms and Partners.