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Wake-up call

Accountants wake up to new AML regulations

26th May 2017
Editor AccountingWEB
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With the fourth Anti Money Laundering directive expected to take effect before the end of June, AML expert Steve O’Neil says some accountants are only now waking up to what they should have been enforcing 10 years ago.   

While the fundamental basics of the 2017 regulations don’t differ too much from the existing regulations, O’Neil said it has still made some accountants sit up and ask "what have I got to do now?" and "should I have already done it?"

“The answer in most cases is yes, they should,” he said.

O’Neil, the MD of Business Tax Centre, recently updated Lifecycle members about the new regulations. Although the bulk of the regulations remain the same, one aspect that has changed, and sure to have dominated the Lifecycle seminars, is the creation of a new supervisory oversight body for professional body supervisors.

Tightening supervision

Upon its announcement, the Office for Professional Body AML Supervision stoked controversy with some professional bodies. As reported on AccountingWEB, some bodies chewed over the new fee this group would place on them. O’Neil believes the extra costs would cause at least five bodies in the accountancy sector to relinquish their AML supervisory function.

Despite the outcry from some corners of the profession, O’Neil supports the tightening of supervision, which had otherwise been patchy. “One of the people who attended [the Lifecycle event] in Birmingham had just had a practice assurance visit,” said O’Neil. “They spent two days going through the normal practice assurances and 10 minutes asking, ‘how's your AML’ - he said, 'that's great, see you next time'.”

As O’Neil explained, the supervisory body’s standards detailed in that example are lax when compare to someone under HMRC supervision, who would have one or two inspectors for a full day just looking at AML supervision.

The overarching supervisory body will also close one loophole well and truly shut: “If one person is struck off one body, they're out of business. So if they do try and set up again without supervision, it's a criminal offense,” said O’Neil.

Criminality test

Another new addition extends the criminality test to all senior managers of accountancy firms. Under the new regulation, the supervisory authority will have to approve the senior staff. Supervisors will have two years to get the test done, which O’Neil says is another onerous issue for those bodies when deciding whether they want to be supervisors or not.

This measure will be enforced to ensure criminals convicted in “relevant areas” and those under investigation don’t hold a management function.

A big wake up call

More so, O’Neil expects the new regulations to act as a “big wake up call” for firms and nudge them into assessing their current policies and procedures.

“Online training has never been sufficient,” O’Neil advised. “A lot of firms think that they're taking a cheap way out, but it doesn't work. Because the main training staff need is what your firm actually produces in the way of policies and procedures.

“So if you never produced any, you never trained your staff on any. There's a big wake-up call happening.”

According to O’Neil, these management policies must be in a legible format - “written down” – and made available to your supervisor upon request. He added: “If you haven't got your proper bespoke procedures, which you should have had from the last 10 years, it may refuse to license you. So do your job right.”

Advice for accountants

So, what should accountants do next? This is the most common response O’Neil receives following his lectures. “They bought a set of guidance and put it on the shelf or subscribed to something. Made their staff go online and tick a few boxes for these generic training but they've never had policy and procedures,” O’Neil said.

For firms ‘waking up’ to the regulations, O’Neil advised:

  • The first thing you do before you set up in practice is work out who is going to supervise you - it's a criminal offence without a supervision
  • Work out policies and procedures. What products and services you offer and what risk is opposed to them by money laundering?
  • How are you going to verify your clients? There's a push away from paper verification onto electronic. People haven't really done the ID verifications under the 2007 regs. You're supposed to have systems check if the person is on a sanctioned list, and whether there is any risk for ID fraud or theft

Above everything else, O’Neil couldn’t emphasise enough: “There's nothing new in this. It's enforcing what has been lax in the professional market for 10 years.”

Replies (9)

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By [email protected]
30th May 2017 10:06

A company that only offers in-house training says that online training isn't sufficient.

Hmmm. This is an advertorial, not journalism.

Thanks (8)
By Ammie
30th May 2017 10:39

We are almost spending more time on bureaucracy as we are on earning. You can spend 24 hours on the subject it will never be 100% safe from its intention. A sensible weighted risk approach is required not one to tie everyone up in the hope of catching a few, only to let them walk away.
What all this fails to highlight is what successes the NCA have had in bringing to task the big culprits, I suspect very very few in comparison to the cost and effort in administering the legislation.
Perhaps the NCA, police and government need to focus more on getting the basics right before dedicating disproportionate rescources on strangling the micro business with AML legislation. Take a look at the thread on HMRC errors and mistakes!!
What about benefit cheats, tax evaders and illegals? Another miserably failed expensive mission.
The small practitioner needs to start planning for great change and seriously consider exiting the profession.

A sledgehammer to crack a walnut syndrome. What next, imprison compliance failures? Where? Our prisons are full!!

Thanks (10)
Replying to Ammie:
By raju m
30th May 2017 14:45

I totally agree with Ammie

Raju M

Thanks (1)
By johnjenkins
30th May 2017 10:55

I don't believe this post is accurate. A friend of mine is "regulated" by Customs. He recieves a phone call every 3 years or so to ask what he has in place. "Common Sense" says my mate. "That'll do nicely" says Customs (not quite like that but the essence is there).

Thanks (5)
By The Black Knight
30th May 2017 12:49

Not a lot of useful information above.
More misery for accountants then because law enforcment are failing to do their jobs so we'll blame someone else.
We really do have quite miserable lives anyway you don't need to make it worse. How many reports have been made that no action has been taken on and what is the estimated tax/crime proceeds that remains unrecovered from reports? Shall we say a low figure of £1M per practice? And now we think people are faking their identity to pay tax and this is not showing up despite NI numbers and UTR's...... FFS where do they find these morons.

Thanks (7)
By Briar
30th May 2017 15:07

"offense" 3 words before "criminality"! That's a criminal offence in my view.

Thanks (3)
By Jack the Lad
31st May 2017 19:08

I left the ICAEW 25 years ago, and am registered for AML purposes with HMRC, cost £110pa. Simples!

Thanks (0)
By Ian McTernan CTA
01st Jun 2017 13:01

I wonder how much money laundering has been prevented by imposing all this extra admin on us? Can we have some figures?

Thanks (0)
By AndrewV12
14th Jun 2017 13:36

AML another hot topic that gets put on the back burner.

How do the rules effect smaller practices.

Thanks (0)