AML beneficial owners checks are not carried out
Accountants are still unaware of the fifth money laundering directive (5AMLD) changes which are set to come into force in early 2020, while a handful are still not carrying out the required due diligence.
Research conducted by identity verification providers Credas found that one-in-10 accountants admitted to not carrying out beneficial company ownership ID checks. The required beneficial owners due diligence checks were included in 2017's AML guidance.
Whether the checks are even carried out is even cloudier amongst 24% of the 250 accountants surveyed. Nearly a quarter confessed to not knowing if their organisation verified beneficial owners at all.
The AML uncertainty extends to the upcoming 5AMLD. The new EU AML directive set to come into law early next year has passed 61% of accountants by. 5AMLD unawareness amongst the survey respondents outweighs those prepared for the changes. The research found that only one-in-five of those who are aware of the AMLD5 directive fully understand the upcoming changes.
Credas expects the beneficial ownership checks to be the most significant change for accountants, as demonstrated by their survey respondents’ general haziness. Arguably, the 5AMLD changing the scope of the existing Trust Register is just as significant.
The 5AMLD is expected to extend the number of trusts that need to be registered. The ATT’s Helen Thornley estimates the extension of the Trust Registration Service to be from around 200,000 to as many as two million.
The 5AMLD, published in June last year, will also tighten the scope to virtual currency platforms and wallet providers, retaliating to the risks of currencies such as bitcoin. Elsewhere, the 5AMLD will end the anonymity of bank and savings accounts and enhanced due diligence measures for financial flows from high-risk third countries.
Other changes include the threshold for identifying ultimate beneficial ownership of a company potentially being reduced from 25% to 10%, and all beneficial company owners needing to be verified as part of Know Your Customer compliance.
Rhys David, CEO of Credas, has voiced his concern about the worrying lack of awareness around the changes. “As the EU tightens its grip on money laundering and investigations are on the rise, businesses really can’t afford to be complacent,” he said. “What’s also concerning is that we have less than a year left until 5AMLD comes into force, and so the process for carrying out beneficial ownership checks needs to be as efficient and watertight as possible to ensure that accountants are at zero risk of financial penalty.”
Not carrying out the beneficial company ownership ID checks is symptomatic of another AML issue flagged by AccountingWEB’s resident AML expert David Winch on a recent podcast (listen below). “Because we are so used to seeing the same things year after year with clients, sometimes we fail to notice the obvious.”
He added: “It is amazing if you stand back and look at something as if you were a stranger to it, you suddenly see things and ask questions which you never asked year-by-year, quarter-by-quarter and would seem obvious to an outsider.”
The profession is also seeing professional body AML supervision reinforced with the newly assembled Office for Professional Body AML Supervision. Again, this new body is flying as much under the radar as the 5AMLD changes flagged. It’s a criticism the professional bodies it’s supervising has held against the new group, although it’s still early days to judge the effectiveness of the group.