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Due diligence

AML beneficial owners checks are not carried out

11th Mar 2019
Editor AccountingWEB
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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.

Replies (5)

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By Matrix
11th Mar 2019 17:05

It’s amazing we get any of our clients’ work done, soon we will be working on our own compliance all the time.

So is the threshold going down to 10% ownership or all beneficial owners? How would I do the latter for a membership organisation with 1,000 members?

Thanks (4)
By johnjenkins
12th Mar 2019 11:28

I recently had a new firm of solicitors do some work for me. I had to go through all the AML and GDPR gumph, no probs. Then out of the blue I had a phone call from them asking if I was the Sir John Jenkins. I was amazed when told they had to ask as it was "due diligence". I actually checked to see if it was a wind up but was told it was part of their identification process. Looks like 1984 came a bit late.

Thanks (1)
By dwgw
12th Mar 2019 11:49

Meanwhile, private schools collect fees from unidentified offshore vehicles and untold millions have flushed through the UK property market.

But an ever expanding, one-size-fits-all, burdensome and punitive regime for regulated professional firms is the answer …..

"Dear potential new client
I'd like to help you but my in-house regulatory compliance department (me, with another hat on) tells me it's not worth the admin.
Regrettably yours"

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By Ray051
25th Mar 2019 15:01

In practice how do we check beneficial ownership?

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By Henry_8
03rd Dec 2019 07:14

Whether or not checks are made between 24% of the 250 assessors surveyed. Almost a quarter admitted not knowing that their organization guarantees their owners at all. The AML uncertainty extends to the next 5AMLD. The EU's new AML guidelines set to be legal next year exceeded 61% of the census by then. 5am ​​ignorance among the test responders arises for those prepared for change. The study found that one in five people familiar with the AMLD5 command fully understand the upcoming changes. Credas expects technology ownership to be the most important change for bookkeepers, as revealed to their respondents' overall risk. He helped me with my finances last month. Clearly, the 5AMLD that changes the size of the existing Register register is important. 5AMLD, published in June of last year, will strengthen the balance in virtual currency platforms and wallet providers, doubling the risk of currencies such as bitcoin.

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