Anti-money laundering regulation is an unfair burden on accountants

3rd Dec 2021
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In the age of international organised crime and global terrorism, nobody disagrees with the principle of anti-money laundering (AML) legislation, not least accountants, who’re required to do a lot of the work.

The anti-money laundering threat landscape is broader today than what it once was. Launderers are trying to hide their funds with more complex strategies, like high-end property deals and sophisticated corporate structures to ‘wash’ the dirty money they made from their crimes. 

Accountancy bodies have, and continue to promote, the best practice on AML. For instance, the Consultative Committee of Accountancy Bodies offers accountants guidance on how to meet their obligations under UK law to recognise, report and prevent money laundering.

Capium has a specially built AML function that allows you to perform checks on your new and existing clients, directly from your system. 

We’ve added that in because we know money laundering and the threats from it are no small matter. As an accountant, you need to be on the right side of the law and comply with your responsibilities, so we ensured accountants could do that with our services.

Regardless, we would still argue the fact that AML measures are put on the shoulders of accountants amounts to an unfair additional burden. We’re using this blog as an opportunity to put that in writing.

We also want to cover, in the absence of the Government stepping in and overhauling its principle that accountants should be the first line of defence against economic crime, what you can do to make AML easier for your firm.

Anti-money laundering responsibilities for accountants

Let’s start with the AML obligations accountants have.

Accountants need to be familiar with the 2017 money laundering regulations, which dictates accountancy firms must have systems, controls and training in place for:

  • assessing risk
  • monitoring existing clients
  • keeping appropriate records
  • reporting both internal and external suspicious activities
  • ensuring clients know how to stay on the right side of the law.

One of these that is crucial to get right, but might seem rather vague, is ‘assessing risk’.

There are two main types of risks for accountants and AML: the types of clients they get and where those clients do their business. 

For instance, if you have a client known as a ‘politically-exposed person’, who you need to ensure you don’t inadvertently help with bribery and corruption, that’s managing risk.

Meanwhile, if your client has business in a high-risk jurisdiction outside of that don’t follow regular AML rules, that’s managing risk, too.

The point is that while it might not seem your clients are up to anything illegal, you need to make sure. 

If the risk of keeping a shady client outweighs the potential profits you could make from them, you might want to consider referring them to another accounting firm.

Accountants & AML: necessary or a burden?

A big challenge that accountants face with AML is cost, which evidence indicates is only going up around the world.

According to London-based global law firm, Norton Rose Fulbright, two thirds of financial institutions have reported spending increases on AML over the past 12 months. 

This doesn’t appear to be a short-term trend, either, with 74% of firms expecting an increased AML spend over the next 12 to 24 months.

Why the increase? Given that 71% of financial institutions across the globe increased regulatory scrutiny in 2020, while 81% expected they would continue to have to spend more time on AML.

While these figures are based on a survey that included a range of institutions, including banks, asset managers and insurance companies, it’s not unlikely these figures broadly represent the experience of accountants, too.

Accountancy firms have huge responsibilities, mainly keeping businesses on track so everyone involved can make a living. With the economic problems caused by the pandemic, that’s arguably where the country’s accountants need to keep their attention. 

The more of their money and time accountants need to divert towards regulatory procedures will only mean more businesses struggling.

That’s not to mention how it's unfair to expect accountants shoulder the biggest burden of AML. At the end of the day, accounting firms are businesses and regulation only serves to hamper their activities and profitability.

We hope it doesn’t happen for the sake of stopping criminals laundering money into the economy, but just how long can the Government afford to outsource its AML to the private sector before the private sector’s priorities (mainly profit) outweigh the necessity to focus on regulatory work?

How can accountants make AML easier?

With the new economic crime levy due to kick in 2022/23, costing accounting firms an extra £100 million a year, it doesn’t seem that the Government is about to take on the AML burden itself.

In that case, you need to know how you can bring your costs down. In a word, the best way to do that is: software.

As we mentioned, Capium includes an AML function, which allows you to seamlessly run checks on clients and see the results all in one place. In one go, your workload is reduced considerably, allowing you to focus on your services.

With software, you can also keep all the records you need to keep in one place so you can rest assured they’ll all be there when you need them.

Ultimately, it’s about staying on the right side of the law and regulations, which you can’t put a price on. So, if you haven’t thought about investing in AML accounting software, reach out to us to enquire about what Capium can offer.