Richard Simms explains how the latest legislation will affect you and your business.
Having had to digest the new Money Laundering Regulations (MLR 2017) very quickly, being out and about giving talks and then putting out the AMLCC interim guidance, it has been useful to have a few weeks to digest and reflect on their likely impact.
MLR 2017 comes with sting in the tail. The promised new Office of Professional Body Anti-Money Laundering Supervisors (OPBAS) has already had draft legislation issued for consultation and is planned to be in place on 1 January 2018. The Financial Conduct Authority (FCA) has issued their own consultation on OPBAS, which seeks replies by 23 October 2017 on both the cost benefit analysis and their proposed sourcebook.
A sourcebook is not necessarily a familiar term in the accountancy and bookkeeping sectors but appears to be widely used by the FCA within its sectorial guidance.
Consistency and quality
This is all important stuff because the role of OPBAS is according to Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists Division at the FCA: “The government asked the FCA to be responsible for reviewing the quality of AML supervision carried out by professional body supervisors. The aim of OPBAS will be to ensure consistency and quality and to drive up standards across all professional body AML supervisors in the UK.”
The keywords here for me are “drive up standards”; it must be read into this that there is a belief that there is somewhere to drive to!
What I’m really saying is this it is a good time between now on the 2018 arrival of OPBAS to cast an eye over your Anti-Money Laundering (AML) compliance. The true purpose of this article is to help me and if you’re willing, to drag you along with me.
MLR 2017 uses in many case familiar terminology. There is much reference made to policies, procedures and control. Risk assessments and references to the size and nature of practices are regular topics. One of the key points of MLR 2017 is the requirement for an assessment of the risk that your firm (I’ll use this term to include a practice of any size from sole trader to multi-partner) is exposed to money laundering.
The most important thing to recognise is that any firm risk assessment will not be static. It is the role of the independent audit function within the firm to review the firm’s AML compliance and to work alongside the person responsible for the firm’s AML compliance. In many cases this will be the same individual board member (or equivalent) or member of senior management. This same person may also be the Nominated Officer (NO) for receiving and making Suspicious Activity Reports (SARs) to the National Crime Agency (NCA).
There are three roles there that may be rolled in to one provided the person is of sufficient seniority within the firm or could be split out if staffing allows.
Policies, procedures and controls have been mentioned earlier. These aspects of compliance must, I presume, be linked to the risk assessment. There’s a degree of ‘chicken and egg’ here because even if your compliance systems are not fully documented (and documenting them is massively important) every firm will have aspects of such systems in place already even if they didn’t realise.
To work with an example, what’s your firm’s cash handling policy? I hope I can make sense of this example to demonstrate how all this fits together!
If it’s your firm’s policy is to accept cash from clients then I would imagine that that could be for fees or for payments to HMRC or even payroll.
I won’t spend long explaining the perceived increased risk of money laundering of a business that is cash intensive and, as such, a firm that accepts cash from a client must, therefore, be prepared to accept the risk that the cash could be the proceeds of crime and therefore money laundering.
Before you accuse me of taking this too far don’t, please, forget, that there is an all crimes approach to money laundering in the UK and that there is no de-minimus. Any undeclared income will be tax evasion and so will be classed as money laundering. Perhaps a further concern would be cash payments from the business that is not cash intensive in its nature.
Back to the point “if the firms sets its cash handling policy” it will be part of the firm’s AML policy that will drive the firm’s procedures; recording of cash receipts and clarifying the source of funds and issuing a receipt for example. The controls will ensure that the firm’s policy and procedures are being complied with, for example, if the policy is “no cash” then confirming that no cash has been taken in.
At this point we can see that the firm’s policies drive the procedures and the controls are consequential to both of these and the recording and review of these ensure on-going compliance. This leads us to consider the firm’s AML risk assessment, not forgetting a specific requirement of MLR 2017. The risk assessment must come after the firm’s AML policies and overall approach or policy to risk has been set.
This then makes sense of some of the core areas to assess the risk of for your firm that are mentioned in MLR 2017, which includes risks inherent in the customer that the firm work with, products and services it provides, the associated delivery channels it uses and the AML compliance levels of the geographic areas that it operates in.
The final point to mention is that although the firm risk assessment will valuable to your firm, it will be equally valuable to your AML supervisor and could be included within any annual return that you submit.
Well, that’s helped me and I hope has been of some use to you too. We’re updating the AMLCC policy, procedure and control documents and also writing a new firm risk assessment tool. We’ll keep users updated on these.
Don’t forget as an ICPA member you get FREE access to AMLCC included as part your membership.
- Richard Simms is Managing Director of the AMLCC
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