Companies in the accountancy sector must follow certain procedures to comply with their AML responsibilities, and the rules are set to get even more stringent as new CCAB anti-money laundering guidelines have just been approved by HM Treasury.
Utilising accountants to launder or invest proceeds from ill-gotten gains or to fund terrorism is not a new phenomenon. With more than £90 billion estimated to be laundered through the UK every year, Shadow Chancellor John McDonnell has said that the UK has become the money laundering capital of the world.
The biggest tool in the arsenal in ensuring that accountancy services are not misused are extensive KYC procedures. Identity verification is a crucial step in the Customer Due Diligence/Enhanced Due Diligence process. AML checks for accountancy services must be especially vigorous when onboarding new customers or reviewing existing clients. At base level, accountancy firms must ascertain the identity of the clients and any beneficial owners, as well as ensure a comprehensive understanding of the nature of the business being undertaken.
The obvious advantage to knowing your customer is the reduction in crime to society, in the form of money laundering, terrorism or identity theft; but prevention of penalty for the accountants themselves should also be high on the list of priorities. Accountants are particularly susceptible to exploitation and therefore all actions in the sector are under constant scrutiny. Any doubt whatsoever in the intentions of accountancy firms can massively dent reputation and resulting fines could prove catastrophic.
To avoid the consequences of the inadvertent handling of criminal proceeds, accountants need to ensure that their KYC process can demonstrate that they are consistency taking appropriate and proportionate steps to mitigate the risks of money laundering and terrorism.
Taking a risk-based approach means that accountants must understand that no clients or customer will ever be free from the danger of criminal activity. Even the most innocent seeming client can be open to corruption. Being particularly vigilant when onboarding new clients and ensuring honest and open communication can help guard against future problems.
Furthermore, adequate KYC procedures will also allow accountants to better understand clients and their financial landscape, which means providing a better service while protecting precious reputation.