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Accountant fined almost £15k for withholding AML evidence

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An ‘overwhelmed’ sole practitioner has been hit with a combined financial penalty and costs of £23,840 after another case of insufficient anti-money laundering compliance leading to tough disciplinary action.

24th Apr 2023
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Malcolm Bass, an ICAEW member since November 1982, was severely reprimanded and fined £14,700, along with being ordered to pay costs of £9,140, after failing to provide evidence to ICAEW to demonstrate his firm’s compliance with anti-money laundering (AML) procedures. 

Bass admitted during his oral submission to the tribunal that his inaction was down to feeling “overwhelmed” by the issues raised and he got to the point where he couldn’t open any letters. 

As reported in April’s disciplinary orders, the sole practitioner’s AML shortcomings were uncovered during a routine cyclical review monitoring visit in March 2011. The extent of the AML issues identified by the reviewer were not sufficient enough to refer to the practice assurance committee, so the case was closed based on the assurances from Bass. 

However, suspicion was raised after Bass's firm did not submit practice assurance annual returns and a QAD meeting was held in March 2019 about the sole practitioner’s lack of progress in addressing his firm’s AML procedures.

Failure to provide information

Bass followed up that meeting later that same month with the action he intended to take, including a firm-wide risk assessment within the following six weeks in addition to carrying out client due diligence reviews and keeping records of this. 

The QAD, however, needed further assurance that Bass was upholding his record-keeping and AML processes, but the regulatory practice group case manager’s requests for information sent between July and September 2019 remained unanswered.

At this point, the case was escalated to the practice assurance committee in 2019 and then the professional conduct committee in 2020. 

This is when Bass was confronted with seven complaints ranging from failure to provide the requested information to failure to provide evidence of this documented risk assessments and customer due diligence, and not providing annual returns for 2018, 2020 and 2021. 

On the day of the tribunal, Bass did provide the outstanding annual returns and confirmation of his indemnity insurance. 

When asked about his AML procedures and reasons for not providing the information about his due diligence, Bass said that he had become “overwhelmed” by the situation. He accepted he should have done more to address the issues but he kept putting it off. 

Sentencing

Bass’s failure to provide information, respond to the QAD, provide AML evidence and provide annual returns equated to six complaints and each came with financial sanction. 

Judging all the complaints in the round, the tribunal decided to severely reprimand Bass and issued a financial penalty of £21,000 which was reduced by 30% to £14,700 because he had made a full admission. 

Combined with having to pay costs of £9,140, the total financial penalty and costs were £23,840. Bass will pay the sum in 12 instalments of £1,986.67 per calendar month. In addition, the ICAEW disciplinary committee also ordered Bass to undertake a QAD visit, at his cost, in 2023 and provide the information requested back in 2019. 

A common theme

AML non-compliance has become a common theme in recent disciplinary reports. Last month ACCA expelled a member for lying about their AML policy after they falsely claimed their policy had been in existence longer than it actually had; while in December ACCA excluded an accountant after he failed to keep up with the AML procedures because he didn’t think the rules applied to his small business clients. 

These exclusions come as the government has unveiled plans to toughen up AML supervision. This drive to make AML supervision more rigorous will likely cascade down to accountants as professional bodies feel more pressure to combat money laundering.  

Replies (65)

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By Hugo Fair
24th Apr 2023 13:48

On one 'side':
- routine cyclical review monitoring visits
- the regulatory practice group case manager’s requests for information
- the QAD meetings
- the practice assurance committee
- the professional conduct committee

On the other side:
- an ICAEW member (since November 1982)

... and the main reason for all the angst & the fine?
Not failings that would even be noticed within a larger establishment, but the dastardly crime of not jumping at the chance of dancing to the tune of that first group!

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By ireallyshouldknowthisbut
24th Apr 2023 14:31

As even "not engaging" lands you with a massive fine from the ICAEW.

AML was about 80% of my last review. They didn't care much about anything else, and nearly every communication from the ICAEW is about it.

If I had wanted to spend my whole life doing pointless paperwork to keep the regulator happy I would have become a teacher.

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By tedbuck
24th Apr 2023 15:18

Fancy not appreciating the seriousness of the crimes involved - failing to tick the right boxes on documents no-one will ever look at or to make reports no-one will ever read.

I think he was lucky not to be shot at dawn.

Still I suppose he was lucky - he might have got his wrist slapped if he had failed to service a client properly!

Shows which way society is heading doesn't it?

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By Roland195
24th Apr 2023 15:48

I opened the article with some misplaced sense of hope it would be about an accountant who has been fined this astronomical sum for actually failing to provide evidence in a specific case of wrongdoing by a client I.E The system works, sort of.

But no, it's another case of someone in the twilight of a career, with 40 year of I assume unblemished service (otherwise past issues would be likely argued against mitigation) getting the book thrown at him.

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By Diana Miller
24th Apr 2023 16:00

I cannot help but feel sorry for someone who sounds like they were totally stressed and struggling to cope. I keep reading articles about stress and burn out in our profession and, whilst I very much agree we need to maintain standards, I also think there needs to be recognition of how hard it is to complete all of our compliance obligations, keep all the clients happy and actually earn a living-especially when you are a sole practitioner doing it all. With some of my smaller clients the AML paperwork can take as long as some of the chargeable work meaning you make no money on them at all year one.

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By Postingcomments
24th Apr 2023 16:24

Another month, another old accountant up before the beak. Maybe they should retire or resign if they aren't up to it any more? Shame they have to be pushed, but it is what it is.

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Replying to Postingcomments:
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By Diana Miller
24th Apr 2023 19:59

Since when has being overworked or overwhelmed been exclusively an age issue?

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Replying to Postingcomments:
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By Tom+Cross
25th Apr 2023 08:32

For ‘old’ perhaps express some respect. Age usually represents experience, which you can’t buy.

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Replying to Tom+Cross:
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By Self-Employed and Happy
25th Apr 2023 09:56

Whilst I get what you are saying there are so many examples of clients we have taken from "older" sole practitioners where we have wondered whether it would be more beneficial if governing bodies actually checked that CPD was being completed each year.

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Replying to Self-Employed and Happy:
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By Tom+Cross
25th Apr 2023 10:17

The secret is when you know that you're no longer gaining experience. A day without learning, is a day lost.

I had major heart surgery, last year and I feel more energised than I have for the last few years. I'm approaching 67 and I like to believe that my 50 years of experience, counts for something and for as long as I can, I intend to produce work, which is better than I did, the day before.

The comments to which I directly responded, were; ill considered, disrespectful and displayed arrogance.

Age is something we cannot avoid. As I say, the secret is when you know you are no longer of any value to your practice.

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Replying to Postingcomments:
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By Red1960
26th Apr 2023 10:18

What an odious, contemptible, prejudiced and narcissistic comment to make.

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Replying to Red1960:
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By carnmores
26th Apr 2023 11:46

too many trolls abound

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Replying to carnmores:
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By Justin Bryant
26th Apr 2023 12:21

Yes, Postingcomments is a notorious troll here.

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By GHarr497688
24th Apr 2023 16:30

AML is a marvellous tool to work out who you are dealing with and make sure that you know your client , understand what they are about and also check ID etc. plus look at your firm as a whole makes sense. The problem is that the way the AML rules are written anyone would feel overwhelmed at the start and no layman guide or help. The rules are written in such a way that they lead to fear and misunderstanding - people should want to engage not run away. When things are so complex why do HMRC feel the need to do a film telling you how to pay the fee and another about a restaurant in London involved in ml. It all seems a bit silly and needs looking at in more details so everyone is on a level playing field. If you need a guide to just tell you how to pay the Fee how on earth are you expecting compliance !!

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Replying to GHarr497688:
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By BryanS1958
25th Apr 2023 12:59

I know my client, without needing to fill in pointless KYC forms and to jump through hoops for AML regs.

The client is, or should have been, checked by the bank, the solicitor and estate agent in the case of property transactions, HMRC in the case of anyone registered with them, the Government, in the case of anyone having dealings with them, etc. So why does the accountant have to do AML, unless they have a client account?

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Replying to BryanS1958:
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By petestar1969
26th Apr 2023 09:53

AML isn't just about KYC info for your clients. Its about the obligation to file SAR's if you suspect or know or have helped them to do something they shouldn't. Not accusing you of anything, of course, but that's what its about, not just KYC.

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Replying to petestar1969:
David Winch
By David Winch
26th Apr 2023 10:49

One of the things which I think could be improved about the CCAB AML Guidance is that the suggested 'red flags' could be more tailored to accountants in practice, rather than being based on the 'regulated sector' as a whole (for whom the MLR 2017 were written).
By way of a simple example, accountants / auditors will know if the client's accounting records are particularly poor. That, in my view at least, ought to be an indicator of a potentially high risk of money laundering. But others in the 'regulated sector' - such as banks and similar financial institutions - will not be aware of that. If you look in the Risk Factors of Appendix D to the CCAB AML Guildance there is no mention of poor accounting records (because the guildance is based on the wording of MLR 2017).
Of course there is nothing to stop individual firms adding to the CCAB list of 'risk factors' in preparing their own documentation - and I am doing that when I am advising firms.
David

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Replying to davidwinch:
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By GHarr497688
26th Apr 2023 11:20

With particular example “particularly poor records” is subjective and would not necessarily be indicative of Money Laundering . Common sense is much more logical approach and a clear definition in Law of exactly what the Accountant is expected to report . Are we to report that a client told us they sent a personal letter with a business stamp or are we to report a business that keeps no records at all ? The fact is the Accountant acts as an Agent and are not Government funded bodies and so AML is not the answer to what Government is trying to understandably achieve!!

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Replying to GHarr497688:
David Winch
By David Winch
26th Apr 2023 12:41

What I am saying is that particularly poor accounting records ought to be an indicator of a potentially high risk of money laundering. That being so the practitioner should be especially alert to the risk that there may be a reportable suspicion of money laundering in connection with that client.
But I am not suggesting that every client with particularly poor accounting records must be the subject of a SAR. That decision needs to take account of all the relevant factors and use the practitioner's knowledge and experience (or "common sense" if you prefer).
I hope that helps.
David

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Replying to davidwinch:
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By johnjenkins
26th Apr 2023 13:50

There you go David. Common Sense and Flexibility, instead of compliance and rigidity. Wins every time.
It's quite funny as you watch over the years. communist countries becoming more capitalistic and capitalist countries becoming more communist. Mt emphasis is on how compliant we have become in our modus operandi and what we should or shouldn't say.

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the sea otter
By memyself-eye
24th Apr 2023 17:27

Nice of them to reduce the 'penalty' by 30% - usually, we only hear of that in criminal cases brought before M'lud.
Oh, I forgot, a stressed elderly accountant (of presumably impeccable character) is clearly a master criminal for 'allowing' millions to be laundered on his patch.
Or not.

I give thanks daily (in the pub) that I quit when I did.

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By DavidWinter
25th Apr 2023 09:41

Hmmm, you can see why so many accountants are unregulated - shame that ICAEW and ACCA can't.

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Replying to DavidWinter:
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By johnjenkins
25th Apr 2023 10:35

Let's go one further. What if we all decided not to pay our subs? We could actually set up our own association, bit like "checkatrade". That would really put the cat amongst the pigeons.

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Replying to johnjenkins:
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By carnmores
25th Apr 2023 12:02

Mmmm... I was under the impression that if you wanted to be an agent you had to register for AML with HMRC if you were not with one of the regulated accountancy bodies

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Replying to carnmores:
Morph
By kevinringer
25th Apr 2023 12:29

You are quite correct, but I'm aware of "agents" who are invisible to HMRC because these agents always use their client's ID, so HMRC always think they're dealing with the taxpayer. Some of these "agents" have done accountancy/bookkeeping courses in college, some have no qualifications. The ones I have had contact with are completely unaware what an "agent" is; they don't know they're not supposed to use their clients' ID and don't know anything about AML. One "agent" I spoke to had finished her college course a few years previously and said no one in college had said anything about AML. She was still in contact with many of her former fellow students who were also supplying accounting/bookkeeping services. After learning about AML requirements from me, she contacted her former fellow students and not one of them were aware of AML either. The irony is, these "agents" submit Tax Returns where they describe themselves as "accountants" or "bookkeepers": the people that HMRC know need to comply with AML. So HMRC should act on that data. I know ignorance is no defence, but I have some sympathy given the college said nothing and HMRC have not acted.

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Replying to kevinringer:
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By carnmores
25th Apr 2023 13:08

all this could be taken care of if HMRC checked the tel number for authorisation or sent email to client with warnings

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Replying to kevinringer:
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By Self-Employed and Happy
26th Apr 2023 15:37

Yes, we have taken some clients from a CIMA guy, set up a business with an IT friend and an AAT Lv 4, all of which have had NO PRACTICE EXPERIENCE at all, an absolute shambles.

All using client IDs to submit, absolutely no one will ever do file reviews and looking at their "working papers" / advice given to clients are not great at all.

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Replying to Self-Employed and Happy:
David Winch
By David Winch
26th Apr 2023 15:58

You probably don't want to hear this but have you considered whether you suspect that the "CIMA guy" and his partners are commiting a criminal offence under Reg 26 or under Reg 86 and Sch 6 MLR 2017 (i.e. they are acting as external accountants without approval by a supervisory body under MLR 2017)?
If you do suspect that, and they are being paid fees for that, then you may have a reportable suspicion of money laundering by them.
#justsaying
David

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Replying to davidwinch:
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By johnjenkins
27th Apr 2023 09:45

If they are declaring their income then there can't be money laundering. Yes they can be done and HMRC can stop them from trading if they don't register with Customs.

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Replying to carnmores:
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By johnjenkins
25th Apr 2023 12:49

Although Kevin has given you the answer, the point I was making was that if we all went "rogue" then our PB's and HMRC would be right up the swanny. So I think we deserve a little more respect than our PB's and HMRC are giving us.

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Replying to johnjenkins:
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By carnmores
25th Apr 2023 13:07

agreed

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Replying to DavidWinter:
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By BryanS1958
25th Apr 2023 13:01

Even unregulated accountants are supposed to comply with AML....how many do is debatable.

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By Self-Employed and Happy
25th Apr 2023 09:54

All this and they don't even bothering actioning / following up on SARs reports.

So even if you do tell us something is wrong we won't follow it up, but don't you dare not tell us or tick boxes for ID / AML or we'll punish you far more severely than the tax payers you've reported.

It's a money making racket for the bodies, nothing more.

AML is something tat should be done at government level and a reference code generated every 3 years, the code then given to Accountants / Solicitors etc who can check their AML is still active on a central gov database.

That is all this needs, rather than the process being repeated by many professions and bodies seemingly using it as a giant stick to beat people with.

If someone was to ask about being an accountant nowadays I'd tell them not to bother.

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Replying to Self-Employed and Happy:
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By Diana Miller
25th Apr 2023 10:04

My daughter works for my practice in the Summer when not at Uni and has the potential to be really good at it . I am however delighted she does not want to join the profession after she graduates.

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David Winch
By David Winch
25th Apr 2023 09:58

This is a most unfortunate case with rather a long history. I have every sympathy with a sole practitioner who finds the many and diverse demands of being in practice overwhelming.
The disciplinary proceedings can only have heaped on additional stress (to say nothing of the financial costs).
It can feel as if one is alone and no help is available but if he could have reached out to someone it could have resulted in a less stressful outcome.
David

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Morph
By kevinringer
25th Apr 2023 10:05

I have every sympathy for Malcolm Bass. He qualified before AML was invented, and all the other red tape that has overwhelmed many of us: SA, MTD, 60-day CGT, and a myriad of new taxes (IPT, MGD, HICB) and changes which have made taxes so much more complex (eg savings tax, dividends etc). And that's before basis period reform and MTD ITSA. Compared to when I started in practice, I now spend more time on red tape and bureaucracy (especially progress chasing HMRC inefficiencies) than I spend on what I regarded as my core duties when I qualified (accounts and Tax Return production). This reduction in time available for core tasks means it is no longer possible to service the same number of clients today as it was in the 1980s. That means employing additional staff to service the same number of clients. That means charging the clients more to cover the cost, and that is very difficult if you have the same client. I have clients from the 1980s, and earlier. It is difficult to explain why costs have increased so much when all the client wants is their accounts and Tax Return completed. The massive increase in complexity means it is becoming increasingly difficult to get to grips with all the rules and regulations and keep up to date. I know the institutes will say "that's what CPD is for". But I must ask whether they should be asking the law makers (and themselves) whether all this red tape is necessary. We know the vast amount of hours spent on AML result in very few SARs, and it appears that most SARs are not acted on. I don't know how many of my SARs have been acted on. I suspect the ratio is at least 1000 hours of my AML time to one actioned SAR (if any at all). The Government might consider this good value for money because the Government doesn't bear the cost of my time, but I certainly don't see it as good value for money and nor do my clients.

What the PBs should be focused on is how all this red tape impacts the quality of accountancy work: after all, we are "accountants" not "anti-money launderers". If practitioners are having to spend extra time learning/applying red tape, that means less time for accountancy. It does appear the PBs are more interested in red tape compliance than quality of the accountancy work. But I shouldn't be surprised because maybe they're observing the direction of HMRC who since the introduction of MTD VAT seem to accept any rubbish as long as it is digital rubbish.

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Replying to kevinringer:
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By tedbuck
25th Apr 2023 10:17

Kevin - you've hit the nail on the head - and HMG are surprised that productivity has reduced. They shouldn't be, it's their fault and the Civil Servants, yet again, finding things to do to justify their salaries and future pensions. I think the technical expression is 'jobsworths'.
As far as AML is concerned it is 'too little too late' as all the laundered money is here anyway - isn't it?

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Replying to tedbuck:
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By Red1960
26th Apr 2023 10:44

It would be interesting to know if Zahawi's accountants submitted a SAR and even more interesting to know if it was acted upon.

One rule for some and a different rule for us lesser mortals?

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By Janeclar
25th Apr 2023 10:29

A very sad situation. I am one of many older sole practitioners who have left the profession due to the increasing complexity of legislation and paperwork, together with the attitude of the monitoring reviewers. I cannot believe that I was actually paying ICAEW to be treated like that!
Sole practitioners definitely have a place in the profession, and I strongly feel that they should be encouraged, rather than harassed. It appears as though ICAEW would much prefer to only have to monitor a few larger firms.

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By Marlinman
25th Apr 2023 10:38

It appears that you could just print off a few checklists and tick the boxes even though you have done absolutely nothing and it would keep them happy.

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Replying to Marlinman:
David Winch
By David Winch
25th Apr 2023 11:34

Actually I think (even on a remote 'desk-top' review) the regulators would see through that rather quickly!
David

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By unclejoe
25th Apr 2023 11:24

Stress in the workplace can be a real killer. It can be associated with very real mental health issues and it is generally recognised by professionals that the incidence of undiagnosed mental health problems in the population is much higher than most would think. Of course the profession needs to root out those who are aiding criminals, or criminal themselves. But where there is no suggestion of that sort of activity, as in this case, I think a better way would be to require the individual to have an independent mental health professional assessment at the start of the investigation process, and for the report to be taken into account. There may be cases where the report unearths issues and set in train a process that can really help the individual. Professional bodies should not be hitting people when they are down. And perhaps we need to rethink the type of people we want to have sitting in judgement upon us, and how they get into those positions. Thank you.

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Replying to unclejoe:
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By Hugo Fair
25th Apr 2023 11:34

PBs helping/supporting their members (instead of fleecing them)?
Now there's a novel idea!

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By alltaxedout
25th Apr 2023 13:32

Never once since the dawn of AML have I seen a following up to a SAR report, yet this guy is put through the wringer. The powers that be are fiddling while Rome burns.

The government should be doping their own job. ID people and issue reference numbers so that we (and other financial/legal businesses) can act and all significant financial transactions require said reference number, that can link to tax records etc.

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Pile of Stones
By Beach Accountancy
25th Apr 2023 19:36

How about the big 4 who regularly screw up on audits but I bet their AML is up to date...

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Replying to Beach Accountancy:
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By tedbuck
26th Apr 2023 12:39

Not only that but who deals with the finances of the money launderers? I bet it isn't John Smith in the High Street. Who had all the branches in Russia and the like? I don't remember ICAEW etc. calling them to task and fining them for their actions. Perhaps it's only the lack of box ticking that gets you fined. Still they have to pay for all the updates to Moorgate offices.

Same, incidentally, applies to lawyers.

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By Justin Bryant
26th Apr 2023 13:18

It's no different to how pollution (or global warming etc.) is not (properly or at all) factored in (by politicians) as an external (public) cost for manufacturers (of whatever), oil companies, motorists and other activities that have adverse environmental effects, where the environment is clearly a finite resource that should be factored into decision making thereto.

The consequential huge additional (99% pointless/ineffective) admin. time (equate with pollution) is not factored in as a cost (time being a finite resource, like the environment) by the politicians and others, leading to the above inevitable dysfunctional and suboptimal effects.

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Replying to Justin Bryant:
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By Justin Bryant
26th Apr 2023 16:18

"“The UK is in the Catch-22 position of not being able to invest enough to grow the economy because it is not generating enough economic growth to be able to afford to do so,” says Martin Wheatcroft, external advisor on public finances to ICAEW. "

https://www.icaew.com/insights/insights-specials/the-future-of-tax-and-p...

Economic growth never has and never will come from pointless excessive form filing (quite the opposite).

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Replying to Justin Bryant:
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By BryanS1958
27th Apr 2023 16:28

On the contrary, most UK growth nowadays seems to be by way of employment of those tasked to form fill and those tasked to form check :-)

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Sarah Douglas - HouseTree Business Ltd
By sarah douglas
26th Apr 2023 18:11

This has been a huge discussion in ICB and many members across the bodies are overwhelmed.

We had a detailed inspection last year and we were delighted to pass with flying colours. It definitely caused stressed though. However I was really pleased to find we were doing the right thing.

I highly recommend taking it in small steps, for example ICB has a whole section dedicated to AML and videos in order how to cover AML and how to deal with it, why you do AML and what would happen in an inspection.

As well as using ICB AML software which is excellent we used Accountancy manager which covers you step by step for every client and allows you to set up reminders to update documents and attach your verification certificate from Veriphy. Our inspector was very impressed with AM records and the software was very helpful to us. I learnt a lot from the Inspector as well who was ex police in financial forensic’s.

Having gone through an inspection I highly recommend anyone to use tools to help them. Happy to help point anyone in the right direction.

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