Panorama alleges EY money-laundering cover-upby
Philip Fisher asks whether last night's exposé of alleged EY money-laundering breaches could leave the once reputable profession of accountancy tarnished beyond repair.
Last night's episode of Panorama on BBC1, which made allegations about a money-laundering cover-up by EY, was shocking.
It was alleged that after being asked to carry out a compliance review of Kaloti, a major Dubai organisation, EY had failed to comply with money-laundering obligations and deliberately covered up those failings.
You have to imagine that the powers-that-be at the UK’s third-largest practice will be spending this morning ensconced with their legal advisers. This could either be with a view to suing the BBC and others involved in making the programme or, alternatively, trying to decide on appropriate action to resolve yet another impending scandal.
Times have not been good for larger firms of late and it reflects badly on us all. They seem to spend most of their time in the media spotlight as a result of corporate failures following inappropriately benign audits and court cases about failed tax planning schemes.
Even in this light, the allegations on Panorama seem astonishing. They involve laundering of drug money through a series of countries, currencies and beyond. The amounts involved beggar belief, with the figure of $5.2bn being bandied around.
There can clearly be little doubt that an investigation which involved both British and French police officers and led to dozens of criminals being convicted of serious offences is well-founded. The results were then presented in a fashion that would do credit to the kind of compelling crime drama that wins multiple awards.
The specific areas that could incriminate EY relate to money-laundering and the obligations of the firm, its partners and employees under the Proceeds of Crime Act 2002. Any accountant reading this column will be well aware that, to paraphrase, if they have reasonable suspicion that an organisation about which they have information might have been guilty of an offence under the act such as money-laundering there is an obligation to notify the practice’s money-laundering officer, who, in turn, should be informing the relevant authorities.
If the TV programme is to be believed, EY and a number of its partners/employees were aware that a crime was being committed since parts of a report confirming that gold bars had been painted silver and smuggled into Dubai were rescinded and replaced with watered-down wording, referring to this crime as a “documentary regularity”.
What seems equally worrying is a statement made by EY to the BBC in which “the accountancy firm claims it did not have to report this to the police because its auditors were not doing accountancy work at Kaloti.” That conflicts with every piece of money laundering training that this writer has received. According to the whistle-blower, the firm was carrying out what was effectively an audit review, even if it had another name.
While it is quite possible that some of the allegations against EY can be justifiably refuted, the fact that not one but two whistle-blowers have been willing to put their heads above the parapet and make accusations to TV companies suggest a strong degree of veracity.
However, it is worth observing that the whistle-blower who used to work for EY (the other was at Deutsche Bank) has retained apparently damning computer records long after leaving the organisation, which of itself sounds dubious.
There can be little doubt that following revelations on TV, the authorities will wish to look into this matter a great deal further. Whether that involves the police or bodies involved with the regulation of accountants remains to be seen.
However, this kind of story is yet another blow for what used to be a practically unsullied reputation for everybody in our profession. Without wishing to pre-judge the final outcome of this case, it would be nice to hear one or two good news stories about accountants to redress the reputation of an industry that could soon be tarnished beyond repair.