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Government unveils plan to toughen AML supervision

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The government’s roadmap to crack down on money laundering reveals plans to strengthen supervision across the current AML regime and improve SARs reporting and utilisation.  

3rd Apr 2023
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The Economic Crime Plan 2 aims to improve the effectiveness of the money laundering regulations through first focusing on anti-money laundering (AML) supervisory regime and reforming suspicious activity reports (SARs), to a little longer down the road, amending the Money Laundering Regulations

The second of these three-year plans from the government spans 88 pages and is broken down into sections such as ‘reduce money laundering and recover more criminal assets’, ‘Combat kleptocracy…’, and ‘cut fraud’. 

The key outcomes in reducing money laundering under this plan include limiting the abuse of corporate structures, combating criminal abuse of cryptoassets, strengthening AML supervisory regime and improving feedback and analysis through SARs reform.  

The government said the plan is underpinned by a £400m investment from financial year 2022/23 to financial year 2024/25, which is made up from £200m of government investment and £200m from the AML levy.

More pressure on the private sector

According to David Winch, AML expert and forensic accountant at Sedulo Forensic Accountants, the plan highlights the pressure on the private sector to play a part in combating money laundering. 

“Only government can legislate - and it has done so recently with a further Bill currently 'in the works' - but the private sector is being asked (or told) to contribute significant resources via the Anti-Money Laundering Levy. In fact, the private sector also endures significant costs in complying with the existing AML legislation,” Winch told AccountingWEB. 

“The government clearly intends to continue and reinforce the drive to make more rigorous the supervision of accountants, lawyers and other professionals within the scope of money laundering regulations (MLR) 2017.  

“This will likely involve increased pressure on the professional bodies and HMRC to show results in their supervisory activities - and that will translate into more penalties for accountants and others.”

AML supervision

A key strand of the plan is to reform the UK’s supervisory regime and improve the MLR. These changes follow a 2022 review, in which the government has four options that it will consult on this quarter before implementing the chosen model. 

Then, later this year the government will also begin a consultation on the proposed amendments to the money laundering regulations.  

The plan admits that “any changes to the regime could take place over a period of years” but in the short term it wants to create a new performance framework and update the office for professional body anti-money laundering supervision (OPBAS) (the supervisor of the supervisors) sourcebook which will drive improvements across the professional bodies. 

The first step in strengthening the oversight of OPBAS and the Treasury is the development of Money Laundering Regulations performance framework and priority indicators this quarter, while late in the year it expects to roll out the refreshed OPBAS sourcebook which sets out the requirements and best practice for the professional body supervisors. 

The arrival of OPBAS in 2018 has cranked further compliance and financial pressure to the accountancy bodies and in turn this has cascaded down on accountants. 

With further onus on accountancy firms to uphold AML standards, David Winch said that he is already seeing examples of adverse outcomes of supervisors’ examinations of firm’s compliance with MLR 2017. 

“There are firms which even now have done very little to comply with MLR 2017 and they are already being caught out by increased supervisory activity - that is only going to get worse. To those firms that are dreading a letter or email from their supervisory body saying that they have been selected for review I would say, 'Don't wait - get your MLR 2017 compliance sorted now!',” said Winch. 

Suspicious Activity Report (SARs) reform

Elsewhere, the Plan describes SARs as a “vital source of intelligence by the private sector” and said that in the financial year 2021/23 these reports stopped over £300m from falling into the hands of suspected criminals. 

But, as a recent comment on AccountingWEB summarised, a number of accountants find the process “utterly pointless and tedious”, adding that “we still comply but to what end I have yet to see”.

Plan 2 is looking to build on the SARs Reform Programme in 2019, which addresses “variations in compliance reporting in some parts of the AML regulated sector and under reporting in others, increase the utilisation of SARs by law enforcement, modernise the technology used for SARs reporting and analysis, and increase the capacity of the UK Financial Intelligence Unit (UKFIU)”.   

According to the plan, the improved collaboration with the National Data Exploitation Centre means every SAR is matched against relevant data sets and used multiple times.

The first stage of the SARs plan is to complete the delivery of the SARs Reform Programme. The milestones to achieve this spill over into the tail end of 2024, with the delivery of new SARs reporting technology, a new SARs database and law enforcement analytical tools next year and 74 new UKFIU staff in 2024. 

After that, the government is looking to enhance SARs reporting at the end of 2023. This includes a roadmap to improve the effectiveness of SARs, develop options to streamline SARs and fraud reporting, and at the end of 2024, increase collection and use of performance data and reporting about SARs.

Companies House reform

As part of the plan to reduce money laundering is the reform to Companies House and limited partnerships. Subject to parliamentary passage, the aim is for this legislation to get Royal Assent this quarter. The forward to the Plan described new legal powers as transforming Companies House into a “proactive gatekeeper”. 

The Plan said that the reform will “improve transparency in relation to UK companies and partnerships” and will deliver a “more reliable Companies Register”. 

Explaining the need to limit the abuse of corporate structures the plan noted that “[T]he abuse of even a small proportion of UK corporate structures is a critical enabler of all forms of economic crime, with tens of billions of pounds likely laundered through UK registered corporate structures every year.”

The complete operational implementation of reform, including capabilities to underpin new Registrar of Companies’ powers, will be confirmed following the Royal Assent of the Economic Crime and Corporate Transparency Bill. 

The reform has divided opinion in the accountancy sector due to the requirement for small companies and micro-entities to file their profit and loss accounts with Companies House

Crypto assets

With cryptoassets being an attractive technological enabler for criminal activity, the three-year plan to combat illicit crypto transactions includes establishing a multi-agency cell by Q4 in 2023, alongside bolstering training to law enforcement and partner agencies at the start of 2024. 

At the end of the year, the Treasury will also be looking to improve legislation to close vulnerabilities that enable the illicit use of crypto-virtual assets.

Reaction

This roadmap to increase the AML supervision follows the first Economic Crime Plan published in 2019. The first plan brought together the public and private sectors for the first time and set out a joint vision for change. 

Michael Izza, chief executive of ICAEW, welcomed the measures and said the Institute would “continue to invest in robust supervision, education and intelligence-sharing”.

He added, “A key success of the first Economic Crime Plan was developing the partnership between accountancy and the public sector to crack down on money-laundering. Tackling economic crime and driving dirty money out of the UK’s financial systems will be best achieved by government working closely with professional body supervisors, and we look forward to collaborating on the actions outlined in the second Economic Crime Plan.

Replies (40)

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By ireallyshouldknowthisbut
03rd Apr 2023 18:08

So in short, its not worked burying small business in paperwork checking things they know already.

So we are going to double down and do more of the same.

£400million MORE invested, on top of I would have thought many times more than from industry, to get a paltry £300million back.

Even the HS2 style cost/benefit analysis would not pass that one.

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By Hugo Fair
03rd Apr 2023 23:18

Despite the undoubted complexity (and overlapping nature) of many of the aspects that fall under this broad umbrella, there are really only two main foci:
1. Mandating the reporting of suspicions; and
2. Investigating those reports.

So why is everything ladled (with an industrial trowel) almost entirely onto the first of these ... ever more time consuming & expensive liabilities applied to the professional private sector ... and almost nothing invested in the potentially productive second aspect?

Surely it can't be because the only intention is to look as though something is being done - whilst spending as little as possible (private sector fines funding over 50% of the running costs)?
Or, even more worryingly, because the govt 'needs' these flows of ill-gotten funds to prop up dubious practices in high finance (and line the pockets of our 'betters')?

Why are there no open source figures on investigation of reports (volumes, values and amounts recovered) that might - or probably would not- justify the burdens & costs being levied on the 'good guys'?

This is no longer even about 'the end justifying the means' ... it's now entirely about the means (irrespective of any lack of impact on the end result)!

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By DavidWinter
04th Apr 2023 09:51

This is how governments 'tackle' crime in general. Make more easy (or even dodgy) convictions, forget the hardened criminals, then brag about the figures. Give the police a slap for being under funded and unable to deal with real crime, and now do the same to the accountants.

Subcontract the blame.

The fact that the Russians were allowed to buy up half of London with laundered money and they've recovered a paltry £300 million from these reports says it all, and let's not forget the 18 months there were given to leave the country in their own time.

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By Marlinman
04th Apr 2023 10:05

They should do their dirty work themselves and not expect accountants to do it for them on an unpaid basis. No accountant is going to grass up his client. Our clients are our friends and source of income. The government are the enemy and just out to rob us all.

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Replying to Marlinman:
Ray McCann
By Ray McCann
04th Apr 2023 12:20

This of course being the attitude that has led to change after change to AML compliance, if that really is your attitude you should be struck off if you are in fact professionally qualified.

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Replying to RayM55:
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By johnjenkins
04th Apr 2023 12:48

No, the change after change is because HMRC (Government) want to do away with the small business and are hell bent on achieving that through onerous paperwork. QU for small business in MTD - say no more.

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Replying to johnjenkins:
Ray McCann
By Ray McCann
04th Apr 2023 16:34

No, that’s just nonsense, no one in Government wants rid of small business but the fact is they have ripped us off decade after decade with varying levels of tax evasion and the lack of response from accountants when AML was introduced has led to the rules being continually toughened up. It’s better that you send in SARs even if nothing seems to happen since if you and we don’t something will happen and that will be even more inconvenient, intrusive and costly. It’s as simple as that.

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Replying to RayM55:
the sea otter
By memyself-eye
04th Apr 2023 17:55

Err.. who are 'they' and who are 'us'
The implication that every 'small business' exits to 'rip us off' is laughable
Most are just trying to survive.

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Replying to memyself-eye:
Ray McCann
By Ray McCann
05th Apr 2023 12:05

It is simply a fact that the incidence of tax evasion and error is greater in small business.

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Replying to RayM55:
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By ClaireR75
05th Apr 2023 16:35

Money launderers seek to transform illegally gained proceeds of crime into legal forms, while tax evaders seek to conceal income and assets, either legally or illegally earned or derived, from detection by the tax authorities.

On the grounds of the above definitions - does tax evasion come under AML ??

Or are you suggesting another department be set up ATE - Anti tax evasion so HMRC can screw a bit more money from us to be forced members of that squad too ? !

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Replying to ClaireR75:
David Winch
By David Winch
06th Apr 2023 11:17

ClaireR75 wrote:

On the grounds of the above definitions - does tax evasion come under AML ??


I'm not sure if this was intended as a serious question. Just in case it was - 'money laundering' is widely defined, it does not necessarily involve 'money' or 'laundering'. For example if I shoplift a pair of jeans from M&S I necessarily also commit a money laundering offence (as I leave the shop I am in possession of stolen property).
So yes, criminal tax evasion necessarily involves money laundering since the evader obtains the benefit of the tax which (s)he evades. If you want to know more see sections 327-329 and s340 Proceeds of Crime Act 2002.
David
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Replying to ClaireR75:
Ray McCann
By Ray McCann
06th Apr 2023 12:18

Tax evasion is a money laundering offence and with respect you should know that.

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Replying to memyself-eye:
Ray McCann
By Ray McCann
05th Apr 2023 12:05

It is simply a fact that the incidence of tax evasion and error is greater in small business.

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Replying to RayM55:
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By Moo
11th Apr 2023 16:55

Mmmm, like the 11,000 Chinese firms that apparently used one residential address in Cardiff to register for VAT, then commit wholesale fraud (Guardian 7 April).
Yes small businesses.
Yes tax evasion.
But could, should, this have been spotted at inception and prevented by even the most rudimentary identity and sanity checks by HMRC AI (or even a living breathing human)?? I suggest yes.
And the infamous Bounce Back Loans, an opportunity that, however well meant was inadequately thought out, enabling a multitude of fraudsters to register bogus companies and pocket £50K a time.
Again notionally small businesses and again something that could have been prevented if the powers that be took a bit more care with the taxpayers' money.

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Replying to Moo:
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By johnjenkins
11th Apr 2023 17:05

Nothing to do with small business. These are crooks and probably not from UK.

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Replying to RayM55:
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By justsotax
05th Apr 2023 12:06

'lack of response'.....how has that been measured Ray? or are you pinning that on a fictitious number the government are suggesting for ML that has happened that should have been identified through any firm registered under the AML scheme?

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Replying to justsotax:
Ray McCann
By Ray McCann
06th Apr 2023 12:21

Oh it was quite easy to measure, it was noticeable that the in tray was empty.

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Replying to RayM55:
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By justsotax
06th Apr 2023 16:08

so based upon nothing then......

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Replying to RayM55:
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By johnjenkins
05th Apr 2023 12:31

AML was introduced by Euroland. So by your logic every small business in Europe is fiddling.
Yes Government/ HMRC do want to get rid of small business. This was started by Gordon Brown and helped by George Osborn. Indications are there for all to see.
Ray you're on your own on this one.
Think back to Maggie taking power and getting rid of the hold that unions had over business, literally setting up small business. Now what have we got, nothing but red tape at each turn, unless, of course you are big business with profits going to every country bar the UK (yes I know UK isn't a country).

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Replying to johnjenkins:
Ray McCann
By Ray McCann
06th Apr 2023 12:23

I think you need to do more research.

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Replying to RayM55:
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By johnjenkins
06th Apr 2023 13:57

Why do I need to research when I've lived it.

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Replying to RayM55:
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By ClaireR75
05th Apr 2023 16:25

Ripped us off ???? I've not yet met a client of mine that can negotiate how much tax they should actually pay to HMRC as apposed to actually paying what they owe !!! (small business v big corporations) And as for rip off I call being charged £300 + by HMRC to be part of some AML squad a rip off .... and if the 'AML squad' is being expanded I totally expect the £300 to increase ! ............. to me that's an additional tax on small business ....

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Replying to RayM55:
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By C J EYRE
05th Apr 2023 10:26

Why have a go at the small accountants. It is not them that keep getting fined millions of pound for [***] ups on big audits. You should remember that the small accountants look on and treat their clients as friends, and not money cows. They probably know more about their clients personal life than the big boys do with their clients, hence they are in a better position to spot money laundering

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Replying to C J EYRE:
Ray McCann
By Ray McCann
06th Apr 2023 12:26

Exactly, there are two aspects to AML, one demonstrating that you have effective procedures for assessing possible risks and that you understand the rules as to when you report and two actually making a report. The former is plainly more work since I would expect most small firms to have few occasions when they make a SAR.

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Replying to RayM55:
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By Hugo Fair
06th Apr 2023 14:20

RayM55 wrote:

Exactly, there are two aspects to AML, one demonstrating that you have effective procedures for assessing possible risks and that you understand the rules as to when you report and two actually making a report.
The former is plainly more work since I would expect most small firms to have few occasions when they make a SAR.

In which case what is the justification (as a set of risk-based investment criteria) for ladling these costs/burdens onto those small firms?

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Replying to Hugo Fair:
Ray McCann
By Ray McCann
07th Apr 2023 16:18

If you don’t then you create a wide space in which dodgy geezers can try their luck with firms that have no reporting requirements.

And realistically what is the annual compliance cost for a small firm?

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Replying to RayM55:
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By johnjenkins
08th Apr 2023 14:00

This is where the problem of AML exists. Originally it was conceived to catch the Drug Barons, but as usual Government/HMRC is trying to hit the bloke (dodgy geezer) who earns a few bob doing a bit of weekend work (which they aren't going to tell you anyway).

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Should Be Working ... not playing with the car
By should_be_working
04th Apr 2023 10:14

I haven't read the plan of course, but dare I ask if there is any analysis of how effective the current regime is? That is, any work on how much actual money laundering has been traced and blocked by the current regs? Or are we seeing a regulator recommending more regulation to build their little empire?

I'm not defending those practitioners who fail to even try and comply (in those cases it's probably indicative of general sloppiness and an unprofessional approach) but lauding the results gained from picking the low-hanging fruit who haven't been ticking enough boxes is neither a measure of success nor failure of the current setup.

And don't get me started again on the publishing of P&L accounts of small companies....

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By 2TunTed
04th Apr 2023 10:38

As others have said, the focus is very much on identifying and reporting with substantial investment in procedures and process. None of us have any idea how effective or otherwise the investment has been but we are going to have to do more.
If the follow up to SAR's is anything like the follow up from other underfunded, understaffed government agencies then, for all the rhetoric from our politicians, it is probably all a bit hit and miss. Not a waste of time. Just nothing like as good as it should be. Still, politicians will have something to crow about, having ignored the advice of experts for years and years and years

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By tedbuck
04th Apr 2023 11:05

All this c**p is totally disproportionate to most accountants. I am sure that amongst our clients there will be a few with back pockets fuller than they ought to be but for the most part we have persuaded them that it just isn't worth it and they are good people and stick with that despite the flagrant dishonesty of Government paying large salaries to Civil Servants to fail to run efficient departments. The sums are eye-watering - surely £400,000,000 could be better spent.
No-one seems to take any notice of SARS - we sent one in which suggested a major VAT fraud being conducted by an overseas company but nothing happened as far as we can tell. So if they do nothing why bother with it all? The obvious thing would be to apply common sense to some of the rubbish which gets sent to Companies House and HMRC. Or just have someone google the postcode of people's homes as shown on their tax returns. They might (well possibly might) think 'OMG how does Joe Soap live in a £800,000 house when his income is only £12570 a year?' But do they? - the answer is no because common sense is not a thing of the present - I mean just look at the Chancellor's budget - not difficult to see where his head has been the last few years - that at least explains his asinine grin.
So we are to be submerged in more wasted time for no good purpose - you'd think that they could at least put a financial lower scale so that those of us with little clients could ignore it just as HMRC ignore the obvious areas where the taxes aren't being declared because they are too small to matter, ignoring the lost tax on back pocket income and claims for benefits which result from the understated income. Muppets the lot of them.
Rant over - thank goodness I am only months away from retirement and good bye to all this rubbish and particularly to the waste of space that is HMRC.

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By Ian McTernan CTA
04th Apr 2023 11:10

Michael Izza, chief executive of ICAEW, welcomed the measures

Of course he did- it will mean yet higher AML fees and more snouts in the trough.

Meanwhile, out in the real world it will mean we pay twice as much for the 'privilege' of being supervised plus endless additional costs dragging down productivity, all to recover a tiny amount compared to the cost of the measures.

I'd rather we just paid directly into a fund which went directly to a dedicated team and scrapped the endless pointless supervision regime which is an utter waste of time and money.

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By johnjenkins
04th Apr 2023 11:26

It just started off with HMRC being the brunt of our wrath, but now it seems that the whole Government is coming under investigation. Why? because they haven't got a clue how to govern. Like them or not Maggie and Tony new how to rule. Since then we have had a pack of wannabees that haven't an iota of common between them. All Labour want to do is have a go at the Tories without any substance in their policies. I foresee a similar approach from the electorate as France is having at the moment.

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LL
By RickyRoark
04th Apr 2023 11:34

Hey guys, the regime that spaffed billions on HS2, dodgy Covid contracts and payments to Ukraine wants to have a chat with you about how to prevent Money Laundering.

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Replying to RickyRoark:
By ireallyshouldknowthisbut
04th Apr 2023 11:42

One does wonder how much money has been pocketed by the decision makers from vested interests. The only people making money out of this are the ones selling the services.

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Replying to RickyRoark:
SMH
By ShakingMyHead
04th Apr 2023 13:26

Not to mention the Bounce Back Loans that were a waste of tax payers money... I'd like to know how many fraudulent claims were made? How many of these companies have gone under? And what has been reclaimed? I'd also be interested to know how many of us on here have had an AML inspection? I'm monitored by the HMRC and I've had one. I think accountants aren't putting in enough reports, hence they're clamping down on us... they probably get more reports from mortgage brokers and maybe solicitors? But they know its going on and are blaming us for not spotting it, like we're supposed to be Inspector Gadget or some Detective in the serious crime office! I bet more fines have been imposed on the accountant than on the criminals themselves! I'd love to see some statistics!!!

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By indomitable
04th Apr 2023 15:08

The government instead of issuing these 'useless' proposals needs to get it's own house in order first

- Billions lost in BBL fraud
- Wasting Billions of taxpayers money in all areas including procurement, funding unnecessary quasi governmental bodies, increasing irrelevant woke civil service jobs
- A benefits system that appears to reward people for not working if they possibly can
- Is it £5M a day on hotel bills for migrants?

The money lost here I would hazard a guess would dwarf any amounts gained by a more rigorous AML process.

Once again a government that tries to deflect everything away from their own mismanagement

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By tedbuck
04th Apr 2023 15:09

Well we had an inspection from our body who shall remain nameless.
I get the vague impression that the bodies are setting themselves up as being impressive overseers to avoid criticism but at the end of the day it is the large firms and large audits that are the problem.
I can't imagine that money laundering on a large scale often happens in small to medium size firms as it would stand out like a sore thumb but what's a few hundred K in the big company's accounts. It certainly doesn't seem to get noticed.
Certainly the big legal firms must be a touch suspect and one doesn't get the impression, other than them ticking the ML boxes, that they have been very good at stopping the UK being the ML capital of the world and most of the oligarchs' money ended up in property so lawyers must have been involved.
So the reaction of the regulators is 'let's make a lot of noise with the little people because HMRC and the like can't really be bothered with them and we'll look good - cause there's not a lot we can do about the big firms and their fines are very helpful to our finances'.
Or am I really too cynical?

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By Ammie
05th Apr 2023 10:54

Its easier to enforce others to fund the work they

* are under resourced to do
* unsure how to tackle
* support their cost cutting and digital implementation
* raise more funds from a penalty regime
* don't want to do

This is in line with many historic moves. Legislate for civil service work to become compulsory duties of the private sector to enable their own work force reductions at root level while overpaid pointless roles still appear to be in full flow higher up.

".............and said that in the financial year 2021/23 these reports stopped over £300m from falling into the hands of suspected criminals."

A mere pin prick.

Remind me again how many billions have been wasted just on the back of Covid related government decisions?

Compliance like this is all well and good but at which point is the focus lost and it becomes a thoughtless routine?

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By Nebs
05th Apr 2023 11:21

If the government want accountants to do their job for them then a fee should be agreed with the professional bodies, and accountants can then bill the government for their time at the end of each month.

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By justsotax
06th Apr 2023 16:12

what next.....will we be asked to be the 'helpline' for taxpayers because the Revenue can't do that either...for which we will be charged to provide a service we do not get any benefit from....

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