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Money laundering: Flag it up

30th Mar 2017
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Accountants face the very real threat of being targeted by criminals in an attempt to hide the source of their funds and legitimise the profits of their crimes.

Addressing money laundering is not just a matter of personal integrity and a reputational issue for the industry. There are far-reaching economic and societal harms which we should not forget, with criminal profits being rechannelled into the funding of organised crime including fraud against vulnerable people, human trafficking, weapons dealing and terrorist financing.

The vast majority of accountants comply with legislation and regulation and play an important role in tackling money laundering. Professionals can mitigate the risk of being unwittingly involved through proper compliance and due diligence checks, by having a good understanding of money laundering indicators and providing detailed, quality reporting of suspicion.

Suspicious Activity Reports (SARs) are absolutely crucial to tackling this issue. Because of this there is both a legal and ethical requirement for professionals to submit a SAR when faced with suspicious activity. Furthermore, figures show that this is no tick-box exercise; there is a clear tangible outcome, with more that £46m of assets being denied to criminals on the basis of intelligence garnered from Defence Against Money Laundering SARs.[1]

SARs are run through a series of checks by the UK Financial Intelligence Unit (UKFIU), based within the National Crime Agency (NCA), to  identify priority cases such as terrorist financing or vulnerable persons.  The SARs database, Elmer, can be accessed securely by law enforcement agencies and other entities to be exploited as an intelligence tool.  No matter how insignificant suspicious activity may seem in isolation, a SAR could provide the missing piece of the puzzle in an on-going investigation. Furthermore, SARs help facilitate broader trend analysis to inform crime prevention strategies.

The NCA acts as the guardian of the SARs regime in the UK and our international links mean that we can share information and insight globally, reflecting the fact that the threat of money laundering knows no borders. 

For the SARs regime to operate at maximum efficiency, it is imperative that data included by accountants is as complete as possible so that it can be successfully utilised by law enforcement agencies. Basic quality standards include:

  • Accurate use of subject identifiers such as full name, date of birth, address and account numbers so that these can be successfully cross-referenced against other records.
  • A clear description of suspected criminal behaviour, as well as the reason for suspicion.
  • The correct SAR glossary codes, of which more detail can be found here.
  • These steps enable data matching by investigators, therefore ensuring better identification of money laundering incidences and associated crimes.

Some of the red flags to spot money laundering which could necessitate the submission of a SAR include questionable documentation, evasiveness or lack of transparency, deals with high-risk countries or unusual transactions in terms of size or nature. These issues may emerge at the beginning of a client relationship or further down the line, but it is crucial to always remain vigilant. Complex business structures without a specific reason, or an excessive reliance on cash, are other possible red flags for money laundering. Do not ignore inconsistencies, no matter how minor they may seem.  Make sure you have procedures in place to enable on-going scrutiny of all aspects of your client’s operations.

Follow a risk based due diligence process and flag up suspicious activity to keep yourself and business reputation safe.  Money laundering poses a serious threat to the UK and we all have a role to play in preventing it.

You can find further information on how to submit a suspicious activity report on the NCA website and look up regulatory guidance through the Accountancy Affinity Group’s supervisory pages.

Replies (2)

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Locutus of Borg
By Locutus
02nd Apr 2017 16:32

" ... figures show that this is no tick-box exercise; there is a clear tangible outcome, with more that £46m of assets being denied to criminals on the basis of intelligence garnered from Defence Against Money Laundering SARs"

But if I correctly read page 77 of your 2015/16 accounts, it cost some £459.7m to run your organisation in that year.

http://www.nationalcrimeagency.gov.uk/publications/715-national-crime-ag...

It is unclear to me whether the £46m assets denied to criminals is for one year or several years, but assuming it is just one year, that means the asset denial rate is just 10% of the cost of running the body fighting it.

That, of course, excludes the lost time across businesses of making the 4 to 5 million reports that have been filed over the course of a decade.

I'm not against a system that requires serious crime to be reported, but can't this system be a bit more cost effective? I suspect the NCA is simply overwhelmed with the huge quantity of low intelligence value reports it receives and has difficulty sifting out the more serious cases.

Many of us were angered the other day, when we found that this bureaucracy is expanding still further and this time we will have to foot the bill for this expansion.

https://www.accountingweb.co.uk/practice/general-practice/accountants-fo...

Thanks (1)
Red Leader
By Red Leader
03rd Apr 2017 11:58

It would be good if Alan Hislop could reply to Locutus' very valid points.

Thanks (1)