Share this content

Panorama alleges EY money-laundering cover-up

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.

29th Oct 2019
Share this content
EY on business
istock_wallix_aw

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.

Replies (14)

Please login or register to join the discussion.

avatar
By Trethi Teg
29th Oct 2019 13:56

I am sure we will read an article sortly where a sole practitioner in Newport Pembrokshire (population 1161) has been discliplined by the ICAEW for not cleaning his shoes before he went to the office and fine him £15,000 and exclude him from the Institute.

Meanwhile EY ............

Meanwhile PWC .........

Meanwhile KPMG ............

Thanks (15)
Replying to Trethi Teg:
avatar
By Roland195
29th Oct 2019 15:50

I was thinking much the same thing. No doubt our checklists are all going to get a page longer.

Thanks (4)
Replying to Roland195:
avatar
By MC1
30th Oct 2019 11:20

Only if you work for a small firm

Thanks (1)
Replying to Trethi Teg:
avatar
By C.Y.Nical
01st Nov 2019 10:36

Meanwhile Grant Thornton ...........

I suppose nobody can remember Arthur Anderson. Too long ago. Ancient history.

Thanks (0)
avatar
By Michael B Bennett
30th Oct 2019 10:20

Why so much surprise about this. The large firms have always thought themselves untouchable. All it will mean is even more legislation foisted upon the profession that us smaller firms comply with.

It is time there was two-tier regulation so that smaller firms can simply get on with the business of looking after their clients, whilst the larger ones should have to meet higher compliance targets and evidence.

Thanks (6)
Replying to Michael B Bennett:
avatar
By philaccountant
30th Oct 2019 11:18

They should be broken up. The market is clearly not functioning correctly and it isn't limited to just accountancy. Far too many mega corporations with too much concentrated power.

Thanks (3)
Replying to Michael B Bennett:
avatar
By MC1
30th Oct 2019 11:32

There was a debate about the use of the word accountant - seems to be a bit upside down to me though - it's the large firms that maybe should be declassified - think i need to search for a description for my firm that removes us from the same class of description as those large firms.

Thanks (1)
Replying to Michael B Bennett:
avatar
By Rgab1947
30th Oct 2019 11:56

Its time some of the senior partners were locked up. That would make them more honest.

Same with bankers. Every month or so another bank gets caught doing big time money laundering.

Very difficult to stay honest with all the skulduggery going on the the big accounting firms and banks. All without sanction or consequences other than fines which the customers will end up paying.

Thanks (0)
avatar
By MC1
30th Oct 2019 11:27

ICAEW Ethics - ...do not bring the profession into disrepute or we will strike you off, take away your assets and put you in prison for the rest of your days - but for that rule would a lot more of this get out? Who was responsible for creating and then keeping that particular ethic? Big firms by any chance?

Thanks (0)
7om
By Tom 7000
30th Oct 2019 11:45

How do you know that the UK MLRO didn't make the appropriate reports?

I didn't see the programme btw.

Wouldn't the local office have done the work not the UK office and therefore follow the local rules there?

Thanks (0)
Replying to Tom 7000:
avatar
By Rgab1947
30th Oct 2019 11:58

Local rules? So its OK then to crook if the local rules allow it? But do they?

Thanks (0)
Replying to Rgab1947:
7om
By Tom 7000
30th Oct 2019 12:07

The point is I was thinking about it from the view point of the UK MLRO.
What responsibility does he have for the 100s or even 1000s of other offices around the world and the various rules in those localities?

I am sure they have a legal department and if he became aware of something he would run it by them and make the appropriate reports. Why would you not? I would.

Thanks (0)
7om
By Tom 7000
30th Oct 2019 11:45

How do you know that the UK MLRO didn't make the appropriate reports?

I didn't see the programme btw.

Wouldn't the local office have done the work not the UK office and therefore follow the local rules there?

Thanks (0)
avatar
By KH
30th Oct 2019 14:35

Same old same old ... when I was working in the very early 1970s at the London head office of the then-largest firm of international accountants (I was an articled clerk at the time), I was shocked to see the firm help a huge international mining company get round the legal embargo on moving money out of Rhodesia ... .......... after many such insights I left the profession in disgust, never bothering to join the ICAEW on passing all the qualifying exams, and exited stage left to become a chef in Switzerland. When I eventually took up accountancy again I never even thought of joining the professional body ... their ethics and mine are worlds apart.

Thanks (4)