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.
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.
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.”