AML and Covid support: Get the details rightby
After more than a year of Covid loans, furlough grants and self-employed income support, evidence of illegal gains is likely to rise. Julia Penny advises accountants on how to act if they have any suspicions.
The anti-money laundering (AML) regulations which apply to accountants are not new. However, the haste that was necessary to support businesses during the pandemic and the consequent lack of checks led to a much bigger risk that accountants will have suspicions of money laundering.
So what should accountants be doing?
The accountant’s role
In simple terms, any suspicion of money laundering must be reported internally to the Money Laundering Reporting Officer (MLRO). In turn, the MLRO must report to the National Crime Agency (NCA).
However, there are a few complexities to watch out for:
- Did the information giving rise to your suspicion come to you through your work? If not, you don’t need to report. Note that the information doesn’t need to relate to a client, it could be a potential client or someone who is a contact of your client.
- Is it an error, where the business or individual didn’t realise they weren’t eligible for support and are now making amends? Money laundering offences require the individual to know or suspect they are committing an offence.
- Did the information come to you in a privileged situation? This means that legal advice, for instance about tax affairs, was being specifically sought from you by your client. In this case no report to the NCA should be made. The rules on this point are complex, so check with your MLRO or take legal advice.
Covid support abuse
Most schemes, however, require the business to have been adversely impacted by Covid-19. Additionally, the money from loans needed to be used for business purposes.
For SEISS there had to be an intention to continue in business, as well as a negative impact on the business caused by Covid.
Various information might constitute a red flag indicating a potential suspicion of money laundering in relation to the COVID support, including the following:
- The business or individual appears to have lied about:
- the date on which the business started to trade
- the impact Covid has had on their business
- their need for support
- their financial position
- the hours worked by employees when furlough money has been claimed
- the nature of tasks conducted by directors when furlough money has been claimed.
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Julia Penny is the principal of JS Penny Ltd which provides technical and training consulting on anti-money laundering procedures, auditing and financial reporting. Julia is a member of ICAEW Board and Council, chair of the ICAEW Ethics Advisory Committee and past chair of the ICAEW...