Any useful spinoff from AML Compliance?

I'm looking for examples of positively useful side-effects from firms' AML Compliance exercises

Didn't find your answer?

I know everyone loves to hate AML Compliance but I would be interested to hear your views on ways in which the burdens of complying with AML obligations have yielded useful information or insights for you.  Or is there really nothing positive to say about AML Compliance?

David

Replies (30)

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By Justin Bryant
09th Feb 2024 11:00

VAT receipts are increased by the mostly pointless cost of this work (that is passed on to clients in our bills), so Government debt is thereby accordingly reduced and I suppose we thereby accordingly all pay a bit less income tax and NIC etc. than would otherwise be the case is the only positively useful side-effect I can see.

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By Roland195
09th Feb 2024 11:13

I've had a few instances of identifying discrepancies in shareholdings, incorrect personal details etc that was useful to identify at this early stage.

One useful side effect might be that because solicitors demand such detailed & conclusive documentation for even the most routine property purchases, the clients tend not to argue as much over providing information to us.

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By Tom+Cross
09th Feb 2024 11:22

I have absolutely nothing to positively say, for AML. I’ve been extremely fortunate in that all of my clients have come to me by way of direct recommendation. I meet all of them, in person and don’t hesitate to disengage if I have the slightest hesitation in their actions.

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Replying to Tom+Cross:
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By JRX
09th Feb 2024 13:11

My due diligence checklist says that introduction from a third party constitues a higher risk!

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Replying to JRX:
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By Tom+Cross
09th Feb 2024 13:49

I wonder why I’m not surprised.

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By Postingcomments
09th Feb 2024 11:32

None. It's purely a time sink.

It is basically an extra tax - the state taking my time rather than my money.

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Caroline
By accountantccole
09th Feb 2024 12:00

Keeps you in a job?

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By paul.benny
09th Feb 2024 12:21

It seems to me that AML compliance is similar to insurance. The law requires that we have Employer's Liability insurance. But it only actually matters if there is a claim, when the insurer largely takes care of it and we're not stuck with the cost.

And I think the compliance obligations act as a bit of a firewall deterring some would-be money launderers from approaching accountants.

Outside practice I've direct experience of routine customer checks that were always giving clean results suddenly turning up a genuine positive. We refused supply and the customer received a visit from the anti-terrorist branch.

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Pic01
By zxcvb
09th Feb 2024 12:53

Occasionally pointing out to a client that their driving licence is out of date.

Makes it all worth it

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By I'msorryIhaven'taclue
09th Feb 2024 13:03

"...yielded useful information or insights for you."

It's certainly highlighted to me that the AML rules don't apply to everyone. There are so many unregistered (for taxes) people holding themselves out to be sole traders; and by banking through their personal bank accounts and never appointing an accountant then being verified for AML is relegated to something of an optional exercise.

In a similar vein, any Joe registering a limited company encounters such light AML checks that it provides a back door for those who prefer revolving Phoenix companies to preparing statutory accounts & CT600.

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By taxdigital
09th Feb 2024 14:06

In tax clients see a lot of cash value in:
- tax saved
- penalties avoided
- keeping the taxman away
- etc etc

With AML there is zero value out there. For firms, it's a pain having to spend billable time on compliance paperwork and responding to professional bodies.

Where was AML when Londongrad was at its peak? Yesterday I saw a letter from a hyperactive Companies (Ware)house seeking to charge £25000 penalty on a client whose confirmation statement (Overseas Entity) was delayed by one day!

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Replying to taxdigital:
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By Justin Bryant
09th Feb 2024 14:34

Please can you kindly tell us more about that crazy sounding CH (RoE) £25k late filing (update?) penalty (without breaching confidence of course)? That sounds very newsworthy (if not totally mad) to me.

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Replying to Justin Bryant:
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By taxdigital
09th Feb 2024 16:32

Well it's penalty 'warning letter' advising that an offence has been committed (s.8 of the Economic Crime (Transparency and Enforcement) Act 2022) in failing to file an'update'of the Register of Overseas Entities which was due within 14 days of the deadline. So, the letter goes on to say a penalty up to £25,000 may be charged for the offence. They also expect an explanation within 28 days if the client thinks no offence has been committed. Should the update be filed within 28 days they would take that in to consideration in deciding the quantum of the penalty.

The regulations are here:
https://www.legislation.gov.uk/uksi/2023/696/made

It was sent to the client's 'registered' e-mail address.

My take on this is that CoHo has got a very handy cash machine in Overseas Entities regime. We'll see the roll out of part 2 of this regime come 04 March 2024.

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Replying to taxdigital:
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By Justin Bryant
09th Feb 2024 17:09

That is very interesting indeed. Very many thanks. Aweb editors please take note of this newsworthy story.

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By FactChecker
09th Feb 2024 15:04

Slow off the mark today, but earlier responses seem to bear out my immediate gut reactions:

1. Has complying with AML obligations ever yielded useful information?
Yes, but not frequently and not related to any potential ML aspect - more that the process reinforces a closer look at things that should have been checked anyway, in terms of accuracy at point of onboarding.

2. Has it ever yielded information pertinent to ML?
No, although it can be a useful excuse for rejecting someone where your guts said No.

3. Is there really nothing positive to say about AML Compliance?
Depends on the yardstick you use for measuring - but, in essence, No.
As in there's no evidence it has reduced volumes in the national money laundrette or assisted the business of practitioners caught up in administering it, but has severely dented the reputation of said professionals (in the eyes of their clients) for being helpful.

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Sandman
By Mr Sandman
09th Feb 2024 15:20

A serious positive.
Clients are more likely to respect & take seriously the Professional services provided, & quibble less about fees.
Those clients who are challenging when requesting AML details, in my experience, are more dodgy, & reluctant to settle invoices on a timely basis. It is then easier to disengage.

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By Kaylee100
09th Feb 2024 23:35

Genuinely..

The systems ensured information gathering about new clients was standard across the firm.

The system, with its need to be signed off, also acted as a motivator to not cut corners on information and background during the busy season on onboarding.

There's a formal reporting route provided.

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By Tax Dragon
10th Feb 2024 08:26

Interesting how everyone focuses on take-on.

I saw a thread recently about source of funds. OP on the thread seemed the diligent type who would ask himself questions of a client irrespective of ongoing AML requirements in relation to that client. What AML does - or should do - includes:

i) it prompts all of us to ask such questions on a daily basis (ie keep the professionally sceptical mind that we were trained to have, if we were trained properly)
ii) it helps us to know what to do if we become suspicious about something. On which point, knowing what we must not do is just as important as knowing what we can - and indeed now must - do. [Kaylee's point, using more words.]

Fwiw I reckon the source of funds OP has a better knowledge of his clients (and would be better able to offer advice proactively) because of his approach - but he sounded like he'd do that anyway, so I don't attribute that benefit to AML. In his case, anyway.

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By I'msorryIhaven'taclue
10th Feb 2024 08:33

We've acquired clients from (two) unregistered and unsupervised bookkeepers last year, as well as a client from an unregistered and unsupervised accountant who operated convincingly through a (now dissolved) limited company.

There are plenty still out there, for any "client" wanting to stay below the AML radar.

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Replying to I'msorryIhaven'taclue:
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By FactChecker
10th Feb 2024 12:01

'Twas ever thus, it's as basic as the realisation that supply will always appear when demand is noticed.

Which is why attempts to 'police all' has a tendency to polarise those seeking to avoid detection.
Some drop down to the dark alleys that I can see simply by wandering through the less salubrious parts of town (where the 'offices' make no pretence of anything other than 'helping you to save money'); whilst others rise up to those serving the uber-rich (who strangely have a similar motto but with a much bigger price tag).

In the meantime the 'squeezed middle' (of professional accountants as well as of their clients) is forced to jump through more rings and spend more money to little end benefit ... aware with increasing discomfort that they keep running into people who aren't suffering in the same way.

I agree with TD's point that (possibly now seen as old-fashioned) basic attributes that you'd expect/hope to find running through the core of any professional may indeed be reinforced through this policing ... but that doesn't make it essential (more like a sticking-plaster on lowered standards) and there's no evidence of it decreasing the funds being laundered.

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Replying to FactChecker:
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By Tax Dragon
10th Feb 2024 12:58

I don't know how that would genuinely be evidenced - you'd have to measure what there is against what there would have been had AML rules not been what they are.

But Paul gave a real life example of something happening, which does suggest some things happen.

And iirc David has previously provided links to statistical feedback from AML reporting.

But that wasn't his question. He wasn't asking "does it fulfil its objectives", but "does doing it have any incidental benefit whatsoever for you".

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Replying to Tax Dragon:
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By FactChecker
10th Feb 2024 13:17

True ... but David slightly undermined his own question by appending "Or is there really nothing positive to say about AML Compliance?" :=)

I guess my (as usual slightly naïve/optimistic) point was where I suggested that the main benefit, as set out by you and now DJKL, was akin to a sticking-plaster on the falling standards amongst many professionals. In other words, helpful as an initial staunching but not tackling the root cause ... which would of course be harder, if even possible.

As always, it's all about risk management - which almost by definition tends not to be susceptible to prescriptive processes and is more effective when biased, via human experience previously garnered in the same field, on a case by case basis.

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paddle steamer
By DJKL
10th Feb 2024 12:49

Not sure what everyone really expects, when doing audits, spending all these hours delving into detailed transactions, how many times did the auditor ever discover a smoking gun- I never found any, though found a few accounts mispostings, but no wholesale error or fraud. Given x hours of work on one of these why does one really expect one's 1 1/2 hour AML check to unearth hidden gold.

I suspect AML processes act more as an awareness focus rather than as a bloodhound, we are all probably more aware and alert despite its ,to a degree, often box ticking execution.

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By GHarr497688
10th Feb 2024 16:10

I loved understanding what AML is all about and how it gave me a sense of worth.
Managed to understand loads more information which meant names and addresses were correct in my database. The files were a great source of extra data and clients thanked me when it came to light documents were out of date or addresses incorrect.
Really helped me. Was even better when HMRC inspected the records and told me I should set up a business to tell Accountants how to get their house in order. You're helping the Country and Client's and yourself by complying. The down side is the cost of time of proper compliance plus the immense amount of knowledge needed to explain too HMRC what AML was all about ending up with be choosing to retire early - well that and MTD. I guess you draw your own conclusions.

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Replying to GHarr497688:
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By Tax Dragon
10th Feb 2024 17:32

GHarr497688 wrote:

Managed to understand loads more information which meant names and addresses were correct in my database.

Going way off topic here, but people of no fixed abode can need financial and/or legal services. If AML restricts their access to such services, then there's something wrong with AML.

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By jwgrogan
10th Feb 2024 17:33

As I understand it, money laundering offences are defined as those that involve criminal property or criminal conduct. HMRC regard most tax offences as civil matters and only resort to criminal prosecutions in extremis. There were only 237 criminal prosecutions by HMRC in 2022/23, 215 in 2021/22, 163 in 20/21 etc. From these tiny figures you could conclude that the accountancy profession rarely encounters criminal tax offences and the whole AML regime for this sector is really just a result of unintended consequences of the fact that unfortunately a lot of tax offences could be treated as criminal offences in theory but in practice never are. If all tax offences were taken out of the criminal code then AML would not apply to accountants and the only downside would be that HMRC would not be able treat a few high-profile cases as criminal prosecutions.

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Replying to jwgrogan:
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By FactChecker
10th Feb 2024 18:06

To some extent, and in danger of arguing with myself, that would only be a valid summary if AML within the accounting profession was solely intended to catch or prevent an activity being performed that was in itself criminal in nature.

Whereas IMHO it is the 'laundering' aspect (i.e. the attempt through subsequent actions/accounts to hide the original source of funds that derived from a criminal activity) that should most often concern the accountancy profession.
And, as TD has rightly mentioned, that should really be an inherent part of the 'business culture' (not just accepting but checking when it doesn't smell right) at *any* point in your dealings with a client - which is why I worry that the tick-box mentality can give a false sense of security (as well as being seen as an expensive overhead).

I accept TD's comment that (in a purist world) it's nigh on impossible to genuinely evidence the impact of AML on the volume of money laundering - but even if not perfectly quantified as sets of with/without AML, there are published 'figures' on the amount of what most people would call money laundering ... and these are far from diminishing.
Might be even worse without AML? Probably - but to what extent and whether it justifies the costs of administering/policing/fining involved is debatable (especially since it doesn't appear to shave anything noticeable off the swilling dirty money that props up so much of the finance and property markets).

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David Winch
By David Winch
11th Feb 2024 13:02

Thanks for all the replies.
I was specifically thinking about useful spinoff for the accountancy firm (not for the UK or the general public or for clients).
When I am helping a firm draft a new Firm-wide AML Risk Assessment I start with a section giving basic information about the firm (its number of directors & staff, office locations, number of clients and gross fee income), its aims and aspirations and what it is 'about'.
For example this might include, 'The firm has 500 clients, of whom 100 are directors of client companies. Annual fee income is in the region of £250,000. The firm focuses on offering annual accounts and tax return preparation to owner-managed businesses within 30 miles of its office in Lintown'.
Drafting this section often proves to be a useful exercise for the firm in standing back and looking at itself and what it aims to be.
David

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Replying to davidwinch:
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By Postingcomments
11th Feb 2024 15:18

Is that the most useful thing you can say about your work? Blimey.........

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By Rgab1947
13th Feb 2024 11:18

None. All clients are known to me or alternatively easy to learn a lot about before, through mutual contacts. I am very careful of whom I take on with strict criteria.

As a result AML is a burden with no benefit. I go through all the steps but only to satisfy my AML supervisor (Not HMRC!).

KYC is almost a copy and paste as is the risk assessment.

Considering the many banks AML failures or deliberate circumvention this just increases my frustrations with AML.

I am grateful to the author with his many learned responses to AML queries. His replies just makes life a bit easier.

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