Accountancy also plays an important role in the financial system, which facilitates important transactions that support the UK economy. Therefore, they have to ensure that their services are not used for criminal purposes. All accountants in the UK have to act honestly, support and comply with the law, do not engage in criminal activities such as financial crimes such as money laundering, and terrorist financing. CCAB (The Consultative Committee of Accounting Bodies) has published a guide to making it easier for accountants to comply with the law and comply with money laundering (ML) and terrorist financing (TF) regulations.
CCAB includes five accountancy bodies covering the UK and Ireland, as follows: ACCA, CIPFA, ICAS, Chartered Accountants Ireland, and ICAEW. CCAB published its first guide in 2017, but this AML guide published a new AML guide on March 7, 2018, due to accountants' failure to operate outside members of professional organizations. This AML guide is intended to be read by organizations that provide accounting, auditing, and tax advisory services in the UK, as well as anyone approved and accepted by the accounting Anti-Money Laundering (AML) audit in the UK.
The Accountancy Sector's Role in AML Compliance
The accountancy sector plays a crucial role in AML compliance, as they are often involved in financial transactions and have access to key information about their client's financial activities. Accountants are in a unique position to detect and report suspicious activities, making them important stakeholders in the fight against money laundering.
AML regulations in the UK require accountants to implement internal controls, maintain proper records, and train their staff on AML procedures. They must also carry out due diligence on their clients to ensure that they are not involved in illegal activities. In the event of a suspicious transaction, accountants are obligated to report it to the relevant authorities.
It is essential for accountants to stay informed about AML regulations and developments in the field. This includes regular training and updating their knowledge on money laundering tactics, as well as conducting risk assessments to identify potential vulnerabilities in their business.
This sector plays a crucial role in AML compliance, and accountants must take their responsibilities seriously to prevent money laundering and ensure that their client's financial activities are above board. By working together with regulators, law enforcement, and other stakeholders, the accountancy sector can help to prevent money laundering and protect the integrity of the financial system.
What Is The Purpose of AML Guidance for the Accountancy Sector?
The AML guidance has been prepared in general to help accountants in the UK comply with UK legislation on the recognition, prevention, and reporting of money laundering. Accountants who comply with this guide will be able to comply with all relevant legislation and professional requirements. The UK anti-money laundering regulations apply only to certain services operated by designated businesses. This AML guide is supposed to make it easy for many businesses to comply with certain AML processes and procedures for all their services. Apart from that, applying anti-money laundering provisions to services that do not fall under the UK's AML regime can be unnecessarily costly. There are multiple laws involving the UK AML regime, and this AML guide aims to make it easier for accountants to comply with these laws' obligations. These laws and regulations are as follows:
- The Proceeds of Crime Act 2002 (POCA)
- The Terrorism Act 2000
- Anti-terrorism, Crime and Security Act 2001
- The Money Laundering, Terrorist Financing, and Transfer of Funds
- Terrorist Asset-Freezing Act of 2010
- The Criminal Finances Act of 2017
- Counter-terrorism Act 2008
Who Is AML Guidance For in The UK?
This guide is for businesses covered by the 2017 Regulation. These businesses are as follows: A trust or company service provider, an external accountant, a tax adviser, an auditor, and an insolvency practitioner. These services are defined as collectively defined services in the UK, and there are also some cross-border business models. The 2017 Regulation scope defines the external accountant as someone who provides accounting services to other people through work. This guide is subject to registration, review, analysis, calculation, or reporting of financial information and regulations other than employment contracts in external accountants. In addition, businesses that are audited by HMRC, which provides both accounting services and trust or corporate services, should also generally comply with this guide. At the same time, HMRC should consider anti-money laundering guidance for Trust or corporate services providers. Only businesses that offer trust or company services and are audited by HMRC have to comply with the HMRC guide.
What are AML Responsibilities of Businesses?
The 2017 Regulation for businesses that provide defined services that we have already mentioned in our article requires money laundering systems and controls that meet the UK money laundering regime's requirements. The 2017 Regulation is obliged to ensure that relevant employees know these systems and also checks whether employees are aware and trains them to implement them appropriately. Enterprises offering defined services are responsible for monitoring and managing AML guidance compliance with the regulations. In order for businesses to comply with the guide, it is necessary to make sure they know the requirements of the 2017 Regulation. If an enterprise fails to meet its obligations under the 2017 Regulation, administrative penalties are imposed on the enterprise and those considered to be responsible. If primary money laundering offenses identified within the scope of POCA obligations are committed at businesses, POCA may apply specific provisions to the regulated sector.
Businesses have to have systems and controls to assess the risk associated with a customer; for example, one of these systems is Customer Due Diligence (CDD). Existing customers are monitored by performing CDD procedures in businesses. In addition, appropriate records have to be kept at businesses, and the Money Laundering Reporting Officer (MLRO) has to prepare a Suspicious Transaction Report (SAR) for suspicious transactions. Relevant employees and businesses should also be properly trained to prevent ML/TF and understand the systems and controls that have been developed. At the same time, the AML skills, expertise, and behavior of the relevant employees should be evaluated. Finally, effective internal risk management systems and controls should be established, and relevant senior management responsibilities should be clearly defined.
Why is The Risk-Based Approach Important in the AML Guide?
Risk-based approach (RBA) Financial Action Task Force (FATF) recommendations are also a basis for meeting the entire ML/TF regime in the EU directive and the UK. Businesses or governments need to analyze the ML/TF risks they face and take the necessary measures for these risks. The risk-based approach is at the core of any business's AML Compliance Program policies, controls, Know Your Customer (KYC), and CDD procedures. With the risk-based approach, businesses can comply with different reactions and measures by accepting that the risks posed by the ML/TF financing activity are not the same. The risk-based approach forces businesses to make evidence-based decisions to target risks better. With a correctly implemented risk-based approach, crime and risk sources in businesses can be identified and prevented to a great extent.
Responsible people in the top management team of a business are responsible for managing all the business risks, including ML/TF risks. Senior managers should ensure that ML/TF risks are analyzed and create a risk profile for their business. When conducting a risk analysis, businesses should evaluate and take into account their own risks and the risks of the market and customers they do business with.
What Is The Purpose of CDD for The Accountancy Sector?
Financial criminals generally try to hide their real identity and property structure by performing complex transactions when they commit a money laundering crime. The purpose of Customer Due Diligence is to know and understand the identity of a customer so ML/TF risks that exist or may exist can be managed properly. With the determination of the customers' real identities, businesses can make informed decisions about the customers and comply with the existing regulations. In addition, CDD helps customers understand the typical situation in a business.
It outlines the required components of CDD under the 2017 Regulation. At the beginning of a new business relationship in businesses, CDD procedures are mandatory at appropriate points throughout the life of the relationship and occasional transactions. Under the 2017 regulation, businesses are required to identify the Customer, then verify the Customer's identity, identify beneficial owners, and take reasonable measures accordingly.
Sanction Scanner Solution for the Accountancy Sector in The UK
Accountancy Sector is a target for criminals to carry out activities such as money laundering and terrorist financing. There are local and global regulations in the UK to prevent money laundering activities in this sector. At the same time, CCAB has published a guide to making it easier for accountants to follow these regulations. Both this guide and the regulations highlight the requirements of KYC and CDD procedures for businesses and the risk-based approach that should be applied in businesses.
Sanction Scanner solutions comply with FATF recommendations and European Union directives. The Sanctions Scanner database contains PEP, sanctions, and Adverse Media data from more than two hundred countries. Businesses can apply a risk-based approach to comply with global and local comprehensive AML regulations with Sanction Scanner's AML database. You can also perform CDD and KYC procedures in accordance with obligations with our AML Screening tool.
