AML: Let’s start at the very beginning…

AML: Let’s start at the very beginning…

Richard Simms goes back to basics with some anti-money laundering building blocks

 

We are fortunate enough to be able to work with a large number of accountants in practice through our work with our Anti Money Laundering (AML) support package, AMLCC, so we pick up on a number of AML issues that ICPA members have. In case you weren’t aware, AMLCC is included with your annual ICPA membership. It is apparent that there are accountants and bookkeepers who are working in practice who are not supervised at all. If you are not registered with an AML Supervisor and you are in practice it is, today, classed as a criminal offence.

Please be aware that the ICPA is not an AML Supervisor and your membership does not cover your requirement to be supervised. Neither is AMLCC an AML Supervisor, and so using the support package does not satisfy your requirement to be supervised if you are providing accounting or bookkeeping services in practice. There’s not room here for the full definition of what constitutes being in practice but if you’d like any clarification please contact us. Here’s a link to HMRC’s website, which explains who the default AML Supervisor is and also explains who should be supervised within our sector; https://www.gov.uk/guidance/money-laundering-regulations-accountancy-service-provider-registration.

For clarity, to be supervised by HMRC registration is required, you will not be automatically supervised.

 

Make it routine and keep it simple

This is an extract from the consultation document on the 4th Money Laundering Directive issued by HM Treasury. I’ve used this as it is a great summary of what we’re all faced with in the regulated sector. The document talks about the regulated sector and goes onto say: “The Regulations require these businesses to know their customers and manage their ML/TF risks. The Regulations are deliberately not prescriptive, providing flexibility in order to promote a proportionate and effective risk-based approach. Relevant businesses must identify and assess their ML/TF risks and put in place systems and controls to manage and mitigate them.”

This makes easy reading, but I feel raises one of my biggest concerns of the AML legislation and guidance. That there is a risk in taking a risk-based approach to too low a level.

For example, the Money Laundering Regulations 2007 (MLR) allow for the application of a risk sensitive approach to customer due diligence. This could in theory lead to a limited amount of due diligence taking place on a low risk customer.

This is where I don’t think such flexibility exists in reality. I don’t believe that your AML supervisors will pat you on the back for doing no due diligence on a client, and what would the law enforcement authorities say?

If you drop below an acceptable level of best practice you are taking on an unnecessary risk. This is why I feel that undertaking enough for every client as a routine approach actually makes your role simpler.

There will be a need to go up a notch for high-risk customers but at least you will know that you reached an acceptable standard for all ‘low’ or ‘normal’ risk clients.

 

Managing high-risk clients

AMLCC users among you will most probably have had a sprinkling of high-risk clients flag up within the risk assessment tool. Those running their own manual system will be familiar with the triggers for high-risk status.

So, what if you do have a high-risk client? I’ve spent a fair amount of time looking across guidance within our sector and across others for a framework around which to map a path of how to manage and mitigate this risk.

There’s plenty around about what high risk is but very little on what to do next. This is clearly an area where more help can be provided to ICPA members. We’re at the first draft stage of an additional module within AMLCC that will provide suggestions of steps to be taken to mitigate and manage the risk and provide access to relevant industry guidance, along with our own views on what’s practical and realistic.

Many of the mitigation steps will be easily achieved and may be simply reinforcing what you already know on the risk areas that have been flagged originally.

 

Built on strong foundations

The routine approach to AML will be the basis of your office procedures. Your approach to managing the unique risks of your firm will be reflected within that procedure and will form the basis of your approach to your policy on AML.

Again, AMLCC users will already have access to outline policy documents within the electronic copy of the manual. What were now working on is integrating a number of the key documents in to the online part of AMLCC so data can be co-ordinated between the different documents and to make it easier to tailor the forms for your own use. So don’t forget: record, record, record.

 

Information flow can help!

We learn from talking to members so your feedback, suggestions and experiences are hugely valuable to us in improving AMLCC’s offering to ICPA members. Please do let us know where we can help, and you may well be helping other members at the same time.

 

  • Richard Simms is Managing Director of the Anti-Money Laundering Compliance Company and FA Simms

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