Accountants foot the AML watchdog bill

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Professional accountancy bodies will have to fund a new Treasury supervisory anti-money laundering regime. But the crackdown to impose consistent standards across the profession will impose extra charges that will filter down to practitioners' subs.

The government plans to create the Office for Professional Body AML Supervision (OPBAS) under the auspices of the Financial Conduct Authority to enforce the new Money Laundering  Regulations 2017. OPBAS will open for business by the start of 2018.

Professional bodies fund regime

According to the consultation document, OPBAS will be funded by an FRC levy on professional bodies. But Malcolm Trotter, the chief executive of the International Association of Bookkeepers, said the arragement was not “morally right" because professional bodies would pass on the fee to firms. 

“You are making people pay who are not the beneficiaries of the AML regime,” Trotter told AccountingWEB. “Professional bodies are not for profit organisations, there is no way they can absorb this so they will have to pass it on.”

Trotter said his views was shared by other professional bodies: “It doesn't make sense because you are trying to foster commitment and goodwill from the profession, but to then impose a further charge when they are already paying for AML supervision, it doesn't sit right.” 

Number of professional bodies ‘risks inconsistencies’

The Treasury explained that OPBAS would strengthen and coordinate the current inconsistent approach to MLR compliance: accountancy and legal services, for example, make up 23 supervisors and 22 of these are professional bodies.

“The number of professional body supervisors in some sectors risks inconsistencies of approach. And data is not yet shared between supervisors freely or frequently enough, which exposes some supervised sectors to risk where there are overlaps in supervision,” wrote the Treasury.

However, Trotter said that it's “hard to see the justification” for the office because the accountancy and legal sectors already attend quarterly AML supervisory forums led by the Treasury.

The Treasury expects the supervisory board will stop the £24bn lost to serious and organised crime each year through inconsistent regulation. The new watchdog will advise the Treasury if it thinks a professional body sould be removed as an AML supervisor. OPBAS will monitor how the bodies are performing and impose penalties where they are considered 'poor'.  

Simon Kirby, economic secretary to the Treasury, said the new money laundering regulations and OPBAS will “bring the UK’s anti-money laundering regime into line with the latest international standards, and ensure consistently high standards of supervision across all sectors, sending a strong message that money laundering and terrorist financing should not and will not be tolerated”.

OPBAS emerged from the government’s cutting red tape review, which ran alongside a separate consultation on the supervisory AML regime.

The supervisory regime is one of the morsels of new features included in the draft regulation which contained repeats of existing regulations.

While practitioners may take the brunt of the professional bodies’ fee, David Winch, AccountingWEB’s resident money laundering reporting expert, said: “[The government’s response] may be more attractive (or less unattractive) to practitioners than an alternative approach such as putting all supervision in the hands of HMRC or some other government body.”

Launching the consultation on 15 March, the government said it was looking for clarity on the new body's mandate and powers. Respondents have until 26 April to respond.

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.

Replies

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By Locutus
24th Mar 2017 10:09

Has a study ever been done about whether the economic crime stopped by AML reports outweighs the cost of administering AML?

I am all for having a system that reports serious financial crime, but I just get the impression that very little actually gets done with these millions of reports (virtually all limited intelligence value) that the system we have inevitably generates.

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By chatman
to Locutus
24th Mar 2017 11:12

Locutus wrote:

Has a study ever been done about whether the economic crime stopped by AML reports outweighs the cost of administering AML?

It didn't seem to stop the Global Laundromat and HSBC laundering money for Mexican organised criminals, so I would guess the cost does not outweigh the benefit.

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to Locutus
24th Mar 2017 11:58

Little Granny from Accacia Road gets put through the ringer to open an ISA yet billions slosh through London seemingly undetected until LATVIA!! blows the whistle.
This is classic managing the haystack.

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to Locutus
28th Mar 2017 13:52

I Think they take the view that once its been reported thats the end of the matter.
It's consistent with
1, Not prosecuting tax fraud
2, Not prosecuting long firm fraud
3, Disqualifying directors, Wow, but not prosecuting.
4, Not dealing with dodgy accountants and lawyers
5, Not prosecuting people that fiddle their expenses (unfortunately thats what happens when the law is a token gesture)
6, At least they just sent Ed Tully (icaew) to prison for fraud £5M I think. took them forever though.

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By RogerMT
24th Mar 2017 11:04

"The Treasury expects OPBAS will plug the £24bn lost to serious and organised crime each year through having several organisations supervising the same sector."
If the Treasury are that confident then why do they even need to pass the cost on to us?!
Yet more bureaucratic hoop-jumping required by the professions. Roll on retirement! :(

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24th Mar 2017 15:46

A story in the Times yesterday stated that just five people have been convicted under money laundering regulations in ten years..........

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to CWservices6064
24th Mar 2017 15:12

I am sorry to say The Times report is in error. What I think they intended to say is that only five people have been convicted under the Money Laundering Regulations in the past 10 years.
Convictions for money laundering are an everyday event in the criminal courts in England & Wales.
Breaching the regulations on the other hand is not an offence of money laundering, it is an offence of failing to obtain the appropriate IDs, or failing to keep appropriate records of IDs obtained, or failing to have appropriate written procedures, or training, or failing to register with a supervisory body, etc.
David

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24th Mar 2017 11:24

Another example of joined up governmental thinking at the expense of others. I have always believed the Guy Fawkes had a sound idea (and I would have been happy to supply the matches for him).

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By Ammie
24th Mar 2017 11:34

I have yet to see evidence of money launderers running scared. Just more pointless expensive red tape that proves little to the honest.
ML needs to be weighted to the significant and not wasted on the trivial, but too often the system breaks down when they have their "man", because he walks free.
ML takes many guises which are overlooked and impossible to police. (Excuse me while I clear my throat).....MPs expenses and political (cough) Lib Dem funding.
Public funds are treated as a bottomless pit and for the out of touch, numb in the head, it's the solution. The wise and well informed know that charging more or throwing money at problems seldom is the only answer. Akin to turning the tap up to fill a bucket with a gaping hole in it.

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24th Mar 2017 12:45

Since the whole AML system began I have had to file two reports for clients where we found significant VAT underdeclarations which the client did not then declare.

Each time we sat back awaiting the inevitable but nothing happened and months passed. In each case we then took the bull by the horns and "encouraged", more like ordered in reality, the directors to liquidate their companies rather than dig themselves an even bigger hole.

Considering the declarations showed the full details, names/addresses/amounts then it makes the whole thing a joke - it was on a plate and yet they're not interested but if we didn't file a report................

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to youngloch
24th Mar 2017 18:52

" more like ordered in reality, the directors to liquidate their companies", careful you don't tip over the edge to "tipping off"!

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to moneymanager
24th Mar 2017 19:31

Giving a client appropriate advice to regularise his affairs - or to prevent further irregularities - is not going to amount to 'tipping off'.
It will in many cases be a tipping off offence to inform a client that you have submitted a Suspicious Activity Report, but an accountant should not be deterred from giving a client good (& legal) advice by fear of 'tipping off'.
The original legislation on 'tipping off' (in s333 PoCA 2002) - which was 'over the top' - was repealed & replaced ten years ago.
David

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24th Mar 2017 13:04

Yet another quango - Response should be to simplify / standardise / consolidate and empower a single lead law enforcement agency for UK and enforce collaboration and data sharing with UK Banks. Surely a national shared ledger data infrastructure investment would have positive business case.

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24th Mar 2017 13:26

So, this wonderful new layer of bureaucracy will magically recover the 24b?

Why would we then be asked to pay for it? Surely they should be offering us money to run it, as it will recover them so much it will have no running costs but be hugely cash positive?

Yet another pointless bunch of civil servants and yet another cost of doing business.

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24th Mar 2017 13:37

So its going to raise £24bn. I vote that my share of this new quango's costs be taken out of this figure. Alternatively I will pay my share of the fee but expect a profit bonus since this is supposed to come from our work.

If not please can I have a seat in the quango (est salary (£100k pa for 1 day a month)

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24th Mar 2017 14:26

I'd be very interested to know how HM Treasury has concluded that £24bn is lost each year through having several organisations supervising the same sector. According to the NCA's annual report for 2015/16, the total value of criminal assets it recovered in that year was £130.2 million. Do they seriously believe that figure can be increased by a factor of 184 simply by shaking up the regulatory bodies?

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24th Mar 2017 14:57

Ridiculous
Plug the gap?
only thing that will do that is if HMRC and the Police get off their fat arses and actually investigate the reports they are actually provided with. It's pathetic doesn't work and ought to be scrapped.

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25th Mar 2017 01:25

I am already an unpaid tax collector and informant .Indeed I am paying for these honours! Will I next be asked to pay for my clients unpaid tax?
Money laundering is a financial affair and the old lady clients do not get involved - indeed most of my clients I have known for 20 years!
Look at Government and Banks - that's where the money laundering is ! Who and how are these lost revenues etc calculated , I mean how on earth do the Treasury know how much is lost to Money Laundering? They cannot even read a Tory Manifesto so what chance to get their sums correct?

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By Locutus
25th Mar 2017 10:52

Over the years, I made a number of relatively trivial AML reports.

But then in 2015 I received a number of calls from victims of a few companies that they thought I had audited. It transpired that someone had set up a fake LLP similar to my own firm, with the intention of including fake audit reports in fake accounts, to obtain credit. None of the directors of those companies were real.

I dug deeper and found many more fake companies involved. It appears the victims' losses exceeded £1m.

Over the course of a year, I filed multiple SAR reports along with ActionFraud police reports and passing information to the Insolvency Service and HMRC.

Virtually no response from any of those, other than the Insolvency Service who eventually (after about 18 months) managed to get a court order to wind a handful of them up.

It goes back to my original, comment of what is the point of the whole costly AML system, if nothing even seems to happen in these more serious cases?

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25th Mar 2017 11:16

I thought we were actively trying to reduce red tape and simplify how we operate.

This would just seem to introduce a whole raft more, we will be more regulated, have more fees and be exposed to more opportunities for fines if your files are not up to scratch.

The time and the cost of checking whether or not Dave the plumber is a member of a drug cartel is already a substantial time burden for us on a £500 fee.

The only way they would seriously put a dent in the 24bn black whole is to put appropriate funds into the law enforcement agencies whose job it is to deal with this, not expecting accountants to become unpaid law enforcement agents.

I would love to know the actual number of crime organisations brought down by reports made by accountants photocopying people's passports.

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04th Apr 2017 16:15

OPBAS have shown to lack a basic knowledge of the existing supervisory regime. They cannot explain or justify their costs and the decision to create this office goes way further than the directive or FATF requires and risks pushing smaller professional bodies out of the business of supervision and into the arms of the HMRC which is a terrible supervisor.

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By samiur
27th Apr 2017 10:41

Dear Sir,

Can anybody explain me the difference between the Debit note and supplier invoice ?

I will be very grateful to you.

regards

samiur

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to samiur
01st Sep 2017 10:44

As well as being utterly irrelevant to the thread, your question is something that shows you know nothing at all about accountancy. This forum is for accountants to ask each other questions, not for people to seek free accountancy advice.

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By chatman
to samiur
01st Sep 2017 10:53

Hi samuir - You are better off starting a different thread for this question, as you will get a wider audience, and people will not want to clutter up this thread with an unrelated issue. This is the link you need https://www.accountingweb.co.uk/node/add/any-answers

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15th Jun 2017 12:03

Its becoming better and better to be un-qualified and not a member of any regulatory body.

If the government want to stop the 24 billion quid lost through money laundering, Accountants and Solicitors are probably not the people to approach.

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15th Jun 2017 12:06

We do take Money Laundering lightly in the UK, some say due to our Public prosecutors, witnesses, police and judges, are very rarely the targets of organised crime.

We dont suffer the consequences of Money laundering so it gets overlooked.

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22nd Jun 2017 12:16

What I think Andrew meant to say was that if one is not registered with HMRC is is very difficult to see if the non-registered accountants and bookeepers are actually complying with the Money Laundering Regs.

In New Zealand is is an offense to practice for payment if you are not registered with the tax authority. In the UK that would be HMRC. This I believe is the only way that the suggested shortfall can be investigated.

Whether you are with an institute or not does not matter. Just had a thought perhaps HMRC could then collect tax from the cash in hand accountants.

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