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Accountants ‘at high risk’ yet 71% don’t know new AML rules

10th Jan 2020
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By Steve Murray, AML specialist, IRIS

A further crackdown on money laundering has begun, with new legislation called 5MLD taking effect today (10 January).

But are you aware how it affects you as an accountant and what you need to do to comply?

We recently ran a poll and found the majority (71% of 148 surveyed) did not know about the new rules.

This poses a problem when you look at the important role accountants can play in combating crimes relating to money laundering and terrorist financing, as The National Crime Agency and Financial Conduct Authority point out.

Join our free webinar coming on 21 January to learn more

The Financial Conduct Authority says: “Lawyers and accountants are also at high risk of enabling money laundering through the UK’s financial system.”

The National Crime Agency warns: “Accounting and legal professionals, and estate agents, can be criminally exploited – this is sometimes complicit, sometimes negligent, and sometimes unwitting – and this small minority of people can pose a very significant threat.

“They can act as intermediaries and use their skills, knowledge and abilities to draft documentation, disseminate funds, and allow highly complex structures to be created that move and store large amounts of criminal money and conceal ownership effectively.”

Money laundering comes at a huge cost to the UK. Estimates are that serious organised crime enabled by money laundering costs the UK £37 billion every year and £90 billion is illegally laundered through Companies House registered shell firms.

The scale is staggering, and it is little wonder that further crackdowns are being made with this latest legislation – which is an EU-wide directive. With the UK still part of the EU for now, the rules very much apply to UK accountants.

Another issue is the increasingly digital nature of money laundering, including through virtual currencies, and the new Directive endeavours to keep pace.

Watch a recording of Steve’s dedicated AML webinar for accountants here

With so much detail involved, below is a little summary of key changes:

Extension of obliged entries: the scope has been expanded to cover tax advisors and letting/estate agents handling €10,000 monthly rent. Art intermediaries, galleries and auction houses with transactions of €10,000 upwards are also included. Crypto assets, such as Bitcoin, will have stiffer requirements, given their prevalence within criminal activity.

Enhanced due diligence: this focuses on high-risk countries, the list of which will be expanded to cover those with an increased risk of money laundering. Additional checks are required to assess sources of wealth, overseas transactions and businesses owned abroad.

Trust registration service: 5MLD expands the scope of the Trust Registration Service, requiring trustees or accountants to register those trusts with the TRS, this includes Discretionary, Interest in Possession, Charitable, Employee Ownership and Bare Trusts.

Beneficial ownership: this required obliged entities to verify the identities of customers or beneficial owners. When an obliged entity goes into a new business relationship with a company or trust that meets the requirements, they must collect proof of registration.

Bank accounts: the UK will need to establish an electronic data retrieval service that lists legal owners of all bank accounts, safe deposit accounts and payment accounts held by financial institutions.

Supervisory bodies: accountancy trade bodies will be asked to produce annual reports of AML activities. A report from the Office for Professional Body Anti-Money Laundering Supervision showed that trade associations are failing to supervise or enforce AML. Read more about that here.

What’s the answer?

If you are struggling to keep pace with all of the compliance, do you have a solution?

IRIS AML is simple-to-use and cost-effective software that helps you to manage and document AML requirements, including fully integrated electronic ID and sanctions/PEP checks, and implement a risk-based assessment scheme. The software also streamlines the client onboarding process, minimises compliance costs for practices and assists with staff training.

Find out more about IRIS AML here or contact Steve at [email protected] 07966 497785 or 0844 815 5555.

To learn more about the new rules, please join Steve’s latest webinar sign up free HERE.