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Accountant fined over failure to adapt to AML rules

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A sole practitioner who failed, over 40 years, to adapt to the changes in legislation has been fined £5,000 after thinking clients would feel “insulted” by money laundering regulation compliance. 

25th Jul 2022
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Christopher Gittins faced disciplinary action from the Institute of Chartered Accountants in England and Wales (ICAEW) this month after he failed to comply with money laundering regulations and document his client due diligence, including risk assessment. 

Having concluded that Gittins “misunderstood the significance of money laundering legislation”, the ICAEW disciplinary found that the Cheltenham-based accountant had “failed to adapt over 40 years to the changes in legislation that had occurred”. 

The sole practitioner has been reprimanded, fined £5,000 and ordered to pay costs of  £12,042.

Not complying with AML

Gittins found himself in the cross hairs of ICAEW after a practice assurance visit in September 2010 discovered that he had not complied with the money laundering regulations and there was a black hole in his client due diligence. 

He initially agreed to document his confirmation of his clients’ identities and compile evidence of his ongoing client due diligence as he completed each annual cycle of work. But in a practice assurance visit in 2018, the reviewer still found a gaping hole in his due diligence and the weaknesses in his anti-money laundering compliance demonstrated Gittins had not addressed the matters arising in 2010. 

Did not understand requirements

ICAEW’s practice assurance committee raised concerns in a meeting in November 2018 about Gittins’s lack of understanding of the money laundering regulation requirements. The committee decided Gittins needed to provide evidence of his compliance, but he failed to do this.  

Gittins, who provides accountancy and taxation services on woodland and forestry investment to high net worth clients in the UK and overseas, said some clients would be insulted if they were required to sign a declaration about money laundering. He also assumed the solicitors would have conducted these procedures before referring the clients on to him. 

Resignation

In order to escape having to comply with the regulations, Gittins even took steps to resign from ICAEW in April 2019. But this didn’t go any further as ICAEW's professional conduct department informed him that he’d have to register with HMRC instead to comply with the regulations. 

A month later he withdrew his resignation, not realising he would still need to comply with money laundering regulations after his membership ended.

‘Failed to adapt over 40 years’

Jessica Sutherland-Mack, ICAEW’s senior conduct counsel, argued that Gittins had failed to apply customer due diligence measures on all clients and conduct ongoing client monitoring. His replies and his lack of responses to the 2018 practice assurance review showed he wasn’t committed to addressing the issues. 

She said that while he made some attempts to gather identity information of clients, the information was inadequate and still didn’t include client risk assessments. 

Sutherland-Mack’s damning conclusion was summed up in the disciplinary report: “Gittins had failed to recognise that the higher the worth an individual the higher the risk, and the social standing of the individual client was irrelevant. His practice had failed to adapt over 40 years to the changes in legislation that had occurred.”

The panel ultimately concluded that Gittins had misunderstood that the requirements were statutory. 

Alison Wood, an expert in professional regulation from Blake Morgan, said:

This case appears straightforward but as we frequently see, Mr Gittins was neither present nor represented at the hearing and thus the panel did not have the benefit of hearing his submissions.

Whilst it is clear from the facts that there were shortcomings in his compliance with the money laundering regulations, it also appears he had ample opportunity to address his failings, which he clearly did not do. There are agencies which give advice to practitioners about money laundering compliance and preparation for monitoring visits. He was afforded an opportunity to address concerns in 2010 when the 2007 regulations were relatively new but failed to heed these warnings and appeared to enjoy a further eight years without issue.

Mr Gittins did himself no favours in his responses and did not appear to take any advice, be it in regard to any response to ICAEW or in relation to the need for him to comply with the law. His responses to ICAEW were reckless and it is therefore perhaps unsurprising that when he continually failed to provide evidence of compliance when requested after 2018, that the above action was taken.

There are a number of offences linked to failures under money laundering regulations, including relating to failures to report suspected money laundering. Whilst there is no suggestion that this is a concern in this case, a lack of knowledge and appreciation of the law in this area can leave a practitioner subject to far worse outcomes than a fine and a reprimand.

Sole practitioners such as Mr Gittins have to be particularly careful to ensure compliance with all laws. He had no support of staff but did have warnings dating back to 2010. Practitioners in such a position would be well advised to seek external support to ensure compliance with all laws and requirements ideally before such concerns are raised by third parties. We frequently see complaints regarding failings to comply with basic laws, which could so easily have been prevented had suitable advice been taken at the outset.

Blake Morgan’s accountancy regulatory team is available to assist with any disciplinary, regulatory and compliance matters arising in the accountancy profession. Click here if you require any of their services.

Replies (34)

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By Trethi Teg
25th Jul 2022 14:37

Wonderful. Sole practitioner hit by £17,000 bill. Client base probably small builders, chip shops and pubs.

However, if you happen to be next in line to the throne you can quite happily take millions in notes from a middle eastern oil man and face no consequences. Similalry if you are a bank faciliatating billions of drug money - no problem.

AML is important in the right circuumstances for the right clients. London based accountants with Russian clients obviously need to be very carefull. Small practitioners in the sticks with small business clients are over burdened by a box ticking jobsworth system of benefit to no one.

But thats the ICAEW for you!!!!!

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Replying to Trethi Teg:
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By CJaneH
25th Jul 2022 15:40

The article states Mr Gittins gave advice on woodland & forestry, that the clients were of high net worth based in UK & overseas & referred to him by solicitors. Not quite the small builders, chip shops & pubs,

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Replying to CJaneH:
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By Paul Crowley
26th Jul 2022 17:39

And income (whatever that means) in 2019 of £50,000
So the costs as a proportion of income are?
Compare that with a similar proportion of the Big four fines for failed audits

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Replying to Trethi Teg:
7om
By Tom 7000
26th Jul 2022 10:30

HNW overseas forestry clients said the article... did you not read the question tut tut :)

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Replying to Tom 7000:
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By Trethi Teg
26th Jul 2022 12:47

You are right I should have read it all but I get so irritated by this sort of thing I run out of patience.

So he had high net worth overseas clients.

Put copies of the false passports and false utility bills on the file, risk assess him as high risk - happy days - the ICAEW are happy, the accountant is happy, the guy overseas is happy and walks off with his illgotten gains.

Pointless box ticking nonsense.

Place and ICAEW member of staff in the big 4 accountants permanently if you want to be serious about this sort of stuff. Similarly place Law Society staff in all the big solicitors in London. Put FCA staff into the banks. 98% of money laundering by value covered there.

However, said overseas clients happen to be mates of the chancellors wife, so no action even if they are caught.

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By Hugo Fair
25th Jul 2022 18:40

I'm torn for once ... Mr Gittins is clearly a cussed mix of fool and what a kind person might refer to as in possession of a 'strong independent streak' - and it is this latter aspect that I believe is actually at the heart of the story.

AML was just a convenient hook for ICAEW to use.

It's evident that Mr Gittins continuing refusal to take any notice of their suggestions & demands was a substantial cause of irritation to them - and when it culminated in his attempt to avoid the issue by resigning from them, it sounds like they took this as the final insult.

Else why order him to pay costs of £12,042 (240% of the fine), which seems like a 'treat us seriously and let that be a lesson to you' type of response?

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Replying to Hugo Fair:
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By Paul Crowley
26th Jul 2022 10:31

Agree
Probably given informal advice during visits and given this started in 2010 the member had 12 years to get organised

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Replying to Hugo Fair:
7om
By Tom 7000
26th Jul 2022 10:31

How hard is it to ask for a passport Utility bill and driving licence.... takes 2 mins and they all do it

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Replying to Tom 7000:
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By Trethi Teg
26th Jul 2022 12:39

My issue with this is the futility of it all.

Yes, its easy to get a passport photo, but if the client is determined to commit a crime do you think the passport is genuine. If you do not know where to get a fake passport i.e. good enough to fool casual observers, then you havent been paying attention. Similarly utility bills can be easily forged.

I am not advocating that but the 0.5% 0f dodgy clients will simply feed you and the banks and the solicitors with rubbish.

So what is the point!

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Replying to Trethi Teg:
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By BryanS1958
26th Jul 2022 12:58

It is indeed futile and there is no point. The only people who comply with AML are honest citizens - if you are a criminal you will find a way around it.

Thanks (5)
Replying to Hugo Fair:
7om
By Tom 7000
26th Jul 2022 10:31

How hard is it to ask for a passport Utility bill and driving licence.... takes 2 mins and they all do it

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By LondonAccountants
25th Jul 2022 19:45

Cases like this does remind as that perhaps we can improve all our Money Laundering processes. I mean who checks the directors and ID every year. Something I need to look into it.

While I hope these checks are really more educational than intention of taking someone to task but these guy didn't really help himself first having been warned albeit a long time back then stupidly stating "some clients would be insulted if they were required to sign a declaration about money laundering" He should have stayed silent and promised to comply with the rules. Begs the question if there is anything else he doesn't agree with from an accounting or tax point of view

Thanks (1)
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By LondonAccountants
25th Jul 2022 19:45

Cases like this does remind as that perhaps we can improve all our Money Laundering processes. I mean who checks the directors and ID every year. Something I need to look into it.

While I hope these checks are really more educational than intention of taking someone to task but these guy didn't really help himself first having been warned albeit a long time back then stupidly stating "some clients would be insulted if they were required to sign a declaration about money laundering" He should have stayed silent and promised to comply with the rules. Begs the question if there is anything else he doesn't agree with from an accounting or tax point of view

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Replying to LondonAccountants:
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By Self-Employed and Happy
26th Jul 2022 10:22

To be honest its a pain remembering to re-do the "risk" assessment every year, so now I have a tab on the working papers.

I don't even think to re-check ID unless I know they have moved house and then I get them to re-provide bills / ID (if it was a driving license)

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Replying to Self-Employed and Happy:
7om
By Tom 7000
26th Jul 2022 10:32

yep working paper tab..... thats how you do it

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Replying to Tom 7000:
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By Paul Crowley
26th Jul 2022 10:36

I do the same
Been doing it for a couple of decades now

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By LondonAccountants
25th Jul 2022 19:45

Cases like this does remind as that perhaps we can improve all our Money Laundering processes. I mean who checks the directors and ID every year. Something I need to look into it.

While I hope these checks are really more educational than intention of taking someone to task but these guy didn't really help himself first having been warned albeit a long time back then stupidly stating "some clients would be insulted if they were required to sign a declaration about money laundering" He should have stayed silent and promised to comply with the rules. Begs the question if there is anything else he doesn't agree with from an accounting or tax point of view

Thanks (0)
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By LondonAccountants
25th Jul 2022 19:45

Cases like this does remind as that perhaps we can improve all our Money Laundering processes. I mean who checks the directors and ID every year. Something I need to look into it.

While I hope these checks are really more educational than intention of taking someone to task but these guy didn't really help himself first having been warned albeit a long time back then stupidly stating "some clients would be insulted if they were required to sign a declaration about money laundering" He should have stayed silent and promised to comply with the rules. Begs the question if there is anything else he doesn't agree with from an accounting or tax point of view

Thanks (0)
RLI
By lionofludesch
26th Jul 2022 05:38

Somebody's fleecing the old fella with those costs. £12000+ is a lot for an undefended, open and shut case.

Thanks (9)
Replying to lionofludesch:
7om
By Tom 7000
26th Jul 2022 10:33

£1000 an hour plus vat ?

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Replying to lionofludesch:
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By Paul Crowley
26th Jul 2022 10:33

And to think, we complain about HMRC penalty farming

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By Arcadia
26th Jul 2022 10:19

Seems fairly lenient to me. Some firms take these penalties as just a cost of doing business.

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By Arcadia
26th Jul 2022 10:21

Seems fairly lenient to me. Some firms take these penalties as just a cost of doing business.

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By BryanS1958
26th Jul 2022 10:43

"He also assumed the solicitors would have conducted these procedures before referring the clients on to him. "

Not an unreasonable assumption. And also demonstrates the stupidity of the AML legislation - why should you have to do AML, when someone else has already done it? In fact, why not just have a central database? It is very expensive and inefficient for everyone to have to perform AML checks on the same person/entity. Unfortunately, to do it properly, it isn't just a case of copy passport and driving licence either, there is a risk assessment involved.

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By North East Accountant
26th Jul 2022 12:18

I know £17K a lot of money but seeing as we've had to do all this AML nonsense for 18 years, I'd happily pay £17K to not to have had to bother.

Of course, I'm not advocating that anyone should break the law, but what a total waste of time, effort and resources all the AML stuff is when we tick all the boxes, do what we should do and the authorities do.......nothing.

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Replying to North East Accountant:
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By BryanS1958
26th Jul 2022 12:23

I'm inclined to agree, but of course it keeps bureauprats and software/credit rating companies/professional bodies in employment.

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By Paul Crowley
26th Jul 2022 18:09

Richard
You always report on the ICAEW disciplinaries, possibly because there are nice convenient monthly reports with outrageous fines and costs
What about the others. ACCA seems to catch so many exam cheats.
Are other disciplinary reports available?

https://www.accaglobal.com/pk/en/about-us/regulation/disciplinary-and-re...

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By tracey2412
26th Jul 2022 20:47

It's not just the ICAEW. I'm supervised by HMRC for MLR - the 'supervision' appears to consist of me paying £340 a year & having to go find out the rules & what I'm meant to do. No resources to speak of except links to the actual legislation which is so heavy in legalese as to be meaningless to mere mortals.

I'm currently being 'followed-up' for a review they did THREE years ago with no contact inbetween.

For background, I'm a bookkeeper. All of the clients for whom I do 'bookkeeping' also have accountants who do the ID/CDD checks & have a verbal agreement I can use theirs if I need to & all my work is duly checked before they submit anything.
I work only with UK based businesses with UK resident owners. No high value. No overseas. No property. No high cash. No-one turns over more than £100K. Most much MUCH less. Including me! None of them would know what a PEP was if they were smacked in the face. If I don't like the way someone wants to do their accounts, wants to manage (or not), I disengage or don't even start. The capacity for fraud / money laundering is negligible.

But that isn't good enough for HMRC. I have to do my own ID checks & risk assessments & record it all & keep it updated every time I add a client, remove a client or change what I do. Onerous? I need to have training. Despite their own guidelines saying that MLR procedures should be 'proportionate to the nature & size of the business', it seems that HMRC want me to conduct the same checks on Ms Smith the florist making £4k a year as PWC do on Russian oligarchs!
Proportion & common sense appear to be sadly lacking.

But I have bitten my tongue, done as asked & am just waiting on the outcome letter to see if it is enough to avoid a fine or criminal proceedings.

I am currently switching away from 'doing' bookkeeping to implementing & training business owners (mainly self-employed) how to use online accounts systems so they're ready for MTD. However, that appears to come under MLR as well so I'll need to remain registered. I'm currently considering ICB though the entrance exams make me anxious as it's been a while! Sorry to whittle on, I've been a bit wound up about this for a few weeks!

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Replying to tracey2412:
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By Hugo Fair
26th Jul 2022 22:13

Well there's an article waiting for Richard to write:
* Exactly which activities do (or don't) require AML registration?
* How is 'proportional' either defined or to be interpreted?
* And, ideally, why any of it (in reality not just legally) matters ?

In the meantime, good luck!

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Replying to Hugo Fair:
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By tracey2412
27th Jul 2022 09:57

oh that would be marvellous cos getting definitive answers out of HMRC is like plaiting fog!
e.g I don't give 'tax advice' (I am not a qualified accountant & would not dare to do so) but I sometimes do take a bank account csv & put it in a spreadsheet & analyse it out in the expense categories for the self-assessment. It is obviously checked by the client as they have to tell me what most if it is, it's just quicker for me to do the excel thing. But that apparently is 'tax assistance' & comes under MLR.

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Replying to Hugo Fair:
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By Paul Crowley
27th Jul 2022 11:56

I would love to see any evidence at all on a report from an accountant ever leading to any action
As in just the accountant report, not added to by 3 separate bank reports and 2 from their legal advisors. Because in that case the accountants report would probably be a complete year after the others and served no purpose
The others know and report when it happened, not when the accounts are being considered up to 2 years later

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Replying to tracey2412:
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By GHarr497688
27th Jul 2022 20:05

I am one of the smallest types of Accountants and turnover less than 100K. I do mainly income and expenditures for a few hundred pounds. One client has a turnover of 1 million but they are still small. I do all my own compliance work as the rules state for clients I have known for 25 years or more. I pay £320 and last year the people at the MLR at HMRC worked at home and forgot to renew - it caused me so much stress and my MP got involved. What with MTD - RTI -AE - AML -GDPR. I am surprised I have not had a nervous breakdown . The people in power live in ivory towers not realising how much us small Accountants take the hassle away . SEISS and JRS were another complete PR disaster. All I know is mistakes are on the increase ,U suspect financial crime is on the increase , checking is less and costs of work will go through the roof. Bring back the good old days !!

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Morph
By kevinringer
28th Jul 2022 15:29

‘Failed to adapt over 40 years’

Has AML been ongoing that long?

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Replying to kevinringer:
RLI
By lionofludesch
28th Jul 2022 15:41

kevinringer wrote:

‘Failed to adapt over 40 years’

Has AML been ongoing that long?

No - but maybe there's other stuff to which he's not been adapting.

He certainly seems to have been making AML a bigger deal than it is.

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