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Here’s to 20 years of money laundering regulations

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Accountants, auditors and tax advisers were first subjected to money laundering regulations on 1 March 2004. David Winch reflects on the past 20 years and charts how the complex and often burdensome rules have significantly impacted the accounting profession.

1st Mar 2024
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Before 1 March 2004, accountants only had to worry about money laundering if they were investing clients’ monies. Only those involved in the movement of money for their client, whether in pension funds or shares, needed to consider money laundering but for the most part, the majority of accountants didn’t. 

That all changed on 1 March 2004 when for the first time accountants had to start thinking about money laundering (under the Money Laundering Regulations 2003). 

“I remember attending courses on this at the time and effectively you were told, ‘you've got to get some ID from all your clients’ and that was it - full stop. Get some ID from your clients. Stick a copy on the permanent file, job done,” remembered David Winch, the director of MLRO support and a speaker at the upcoming Festival of Accounting & Bookkeeping (FAB).  

AML has become more complicated

The 20-year-anniversary of the money laundering regulations will hardly be greeted by accountants dancing in the streets. Anti-money laundering compliance has only evolved since 2004, with the added scrutiny and burden starting to feel like a full time job for accountants and bookkeepers. 

The strain of AML on the accounting profession is illustrated by a number of sessions at FAB dedicated to advising accountants and bookkeepers through the maze of compliance, along with vendors offering solutions to make the whole process easier.   

“There was nothing like AML software or anything like that [in the beginning]. And then each time they bring out a new set of money laundering regulations - there was a set in 2007 and in 2017, and further amendments since then - it only makes the compliance more complicated,” said Winch, adding  “If you view it as a nuisance, then it's becoming more of a nuisance.” 

The money laundering regulations stem from the work of the global body, the Financial Action Task Force. Winch explained that pre-Brexit, the European Union handled all the regulations, pumped out EU directives, and the UK government rubber stamped that into UK law. 

“I’m sure there were a few people thinking if the UK voted to leave the EU, we could ditch all this money laundering stuff. The UK voted for Brexit and it didn’t make any difference at all; except they changed the name on the front of the regulations from ‘EU directive’ to ‘UK directive’. So money laundering regulation is never going away.”

Accountants caught in the AML net

The passage of time hasn’t helped to quell any of the frustration from accountants, feeling aggrieved that they were pulled into this extra compliance in the first place. In a sense, Winch acknowledges this frustration. 

“If you wanted to set up a system to deter and detect crime, you wouldn't set about it by saying, ‘let's have all the accountants do identity checks and money laundering, compliance checks on all their clients because that way, we will catch all the criminals who are involved in financial crime’. That just isn't the way you do it at all,” he said. 

He said from the government point of view, accountants can facilitate and can be gatekeepers for financial crime, so we should have some regulation. But Winch pushes back slightly, saying that the regulations are weighted more towards foreign oligarchs investing dirty money in UK properties, not the bread and butter of what accountants do for small, owner-managed businesses carrying out legitimate work in the UK.

Winch pins the blame for this “grab net approach” on the government writing the legislation to cover everything so they don’t leave any loopholes. The reason for this dates back to the Proceeds of Crime Act 2002, where money laundering was defined as involving any asset that is a benefit of any crime.

The government was responding to previous legislation in the 1900s, where Winch said you had legislation for drug crime and a separate legislation for non-drug crime, but what happened was those being prosecuted for, say, a drug crime would plead not guilty of that and claim it was fraud, and vice versa. 

“Unfortunately, we accountants in general practice, high streets up and down the country are paying the price of that approach, because we have to comply with money laundering regulations, which are designed not for accountants at all, but designed for banks and designed for international money transfers and so on. We've all stuck with it. And it's going to stay.”

And if anything, the scrutiny of the regulations is only getting tougher, as professional bodies continue to be put under increasing pressure from the Office of Professional Body Anti-Money laundering Supervision (OPBAS).

Meanwhile, the Treasury is exploring ways to increase AML compliance by shaking up the current supervision model, where it’s weighing up whether it hands additional powers to OPBAS or strips the professional bodies of their existing supervision powers and creates an all-powerful new watchdog. 

Stop worrying about AML and just do it

Winch emphasised that the 20-year anniversary of the regulations should act as a wake up call to those burying their heads in the sand and to apply their mind to their AML compliance. 

He said that he’s spoken with accountants under immense stress because they’ve been pulled up by their professional body, and they fear that they’re going to close their business and have to let go of their employees because of their non-compliance. “If you have an investigation by your professional body, you will be literally worried sick, and it goes on for months - you just don't need that,” he said. 

“Being an accountant in practice is hard enough without having all that added anxiety of a money laundering investigation by your professional body.”

Rather than getting to that point, he encourages accountants in need of advice to get help - whether from specialists or professional bodies - and then to actually implement it. “It's actually not that difficult,” he said. “It can be time consuming. If you've got, like, 500 clients and you've done nothing, then you've got some catching up to do but that is much better than that anxiety.

“Let's deal with it. We are where we are. AML is here to stay - so stop worrying about it. Just do it.”

David Winch will be speaking on the State of the Nation: AML panel at the Festival of Accounting & Bookkeeping on 13 March. The two-day event will also include a number of other workshops on AML compliance, alongside the opportunity to speak with vendors specialising in AML software. Book now for your FREE ticket.   

Replies (16)

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By johnjenkins
01st Mar 2024 09:44

What has 20 years of AML achieved? Absolutely nothing. Uuuuuuh. (my singing is better than my spelling)
We've already had this discussion on another post.

Thanks (4)
Replying to johnjenkins:
David Winch
By David Winch
01st Mar 2024 12:10

If one wanted to tackle financial crime (including tax evasion) one would put more resources into the law enforcement bodies (police, SFO, CPS, Trading Standards, etc), HMRC, and courts. One would not tackle financial crime primarily by putting AML responsibilities on High Street accountancy practices.
But we are where we are ....
David

Thanks (5)
By JCresswellTax
01st Mar 2024 10:22

Worst part of the job, by a country mile.

Thanks (4)
Replying to JCresswellTax:
David Winch
By David Winch
01st Mar 2024 11:58

JCresswellTax wrote:

Worst part of the job, by a country mile.


If you are saying that because it seems boring and pointless then fine, I understand why you feel that way.
If you are saying that because it is difficult or consumes a lot of time or makes you anxious then do send me a private message and we can have a chat.
David
Thanks (0)
Replying to davidwinch:
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By Rob Swan
03rd Mar 2024 14:19

The problem is, (so far as I'm aware), the lack of any significant evidence in support of MLR/AML actually reducing money laundering. Big institutions found at fault for non-compliance. London City's reputation as Putin's Laundromat, etc, etc... All the time burdening 'small' businesses with heavy admin loads. Accountants - not to mention all the other professionals aslo burdened - have every right to complain. Yes?

Thanks (1)
Replying to davidwinch:
By JCresswellTax
19th Mar 2024 14:08

davidwinch wrote:

JCresswellTax wrote:

Worst part of the job, by a country mile.

If you are saying that because it seems boring and pointless then fine, I understand why you feel that way.

Sorry for the delay in replying, I had been banned! It is this David, but thanks for your kind offer.

Thanks (0)
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By Justin Bryant
01st Mar 2024 11:17

This is akin to celebrating 20 years of Putin's rule or whatever.

Thanks (6)
Replying to Justin Bryant:
David Winch
By David Winch
01st Mar 2024 12:14

But CAKE!

Thanks (1)
Replying to davidwinch:
avatar
By FactChecker
01st Mar 2024 20:19

It's alright, David, you'll feel better when you admit what you really think about it:

"we accountants in general practice, high streets up and down the country are paying the price of that approach, because we have to comply with money laundering regulations, which are designed not for accountants at all, but designed for banks and designed for international money transfers and so on."

There, doesn't that feel better?
Now, how to square that with “AML is here to stay - so stop worrying about it. Just do it.”
hmmmm ...

Thanks (5)
Replying to FactChecker:
David Winch
By David Winch
01st Mar 2024 23:02

Hi, thanks for reading my comments.
I don't see any inconsistency there. We, as accountants, sell compliance. We tell our clients that they (and we) have to comply with government (particularly HMRC and Companies Act) requirements.
Similarly we have to, in our own conduct, comply with government requirements. We also know that if our AML Compliance is inadequate we are likely to get pulled up about it (even though the MLR were not designed for us). So just do it.
David

Thanks (0)
Profile
By indomitable
01st Mar 2024 13:01

David Winch makes a living from providing AML advice and support correct? Would he advocate scrapping it?

For us independent accountants that have to operate it, AML is complete overkill.

What is government trying to achieve here? All it does is add another layer or regulation that catches next to nobody. Where was the government with the bounce back loan debacle - £17BN fraud as I recall. Did the government get into trouble over this - No!! But when us professionals fail to adhere to a regulation (even though there is no money laundering or fraud) we get a hefty fine and slap on the wrist.

I bet if you surveyed every accountant and professional adviser they would say the same.

Totally not fit for purpose!! Like everything government is doing at present

The expression "can't see the wood for the trees" springs to mind

Thanks (9)
Replying to indomitable:
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By Trethi Teg
01st Mar 2024 14:16

I could have simply thanked the post by Indomitable but I dont think that is enough. I agree with his post 100%. 2

The AML procedures carried out by 90% of the accounting profession are a complete and utter waste of time. The other 10% i.e. PWC, KPMG etc are the accountnats who do have a role to play as they are the practices that generally deal with those individuals and other legal entities are in a position to perpetrate the sorts of crimes that need to be stopped.

If the polititions are serious about this they should put government compliance officers in the banks, solicitors, estate agents and accountants in the largest cities of the country as they are the businesses and locations where 99% of the large scale crime covered by AML is committed. They wont do this because they will find how many of those highlighted by AML checks are freinds and associates of theirs.

I have had a number of ICAEW routine visits over the years and they are a complete waste of time. They are box ticking checkers only with no regard for the main purpose of our profession i.e. the quality of services provided to our clients.

Thanks (6)
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By petestar1969
01st Mar 2024 14:25

I know accountants who still think all they need to do is get client ID and stick it on the permanent files and file a SAR if the client doesn't play ball.

What would help, I believe, is the authorities actually doing something with the SARs they want us to send them.

When I was an MLRO I reported many clients for fiddling their accounts and gaining a tax advantage, leaving out cash sales, making up bogus expenses etc., but nothing ever happened.

Surely, the proceeds of the crime of tax evasion (the tax that wasn't paid due to accounts being fiddled), should be on HMRCs radar? Maybe it is now they want to bring in MTD for ITSA quarterly reporting......

Thanks (1)
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By GHarr497688
01st Mar 2024 14:48

I recently had a full HMRC AML Inspection which I came out 10/10 in. HMRC said I should take up AML training when I retire ( which I have ) , if you want any hints or tips PVT me.

Thanks (0)
Replying to GHarr497688:
DougScott
By Dougscott
02nd Mar 2024 01:30

GHarr497688 wrote:

I recently had a full HMRC AML Inspection which I came out 10/10 in. HMRC said I should take up AML training when I retire ( which I have ) , if you want any hints or tips PVT me.

It might be helpful for all of us if you posted what they like to see that made you 10/10!

Thanks (2)
Replying to Dougscott:
the sea otter
By memyself-eye
02nd Mar 2024 11:59

Maybe you get ten out of ten for completing just two categories:
'Box' and 'Tick'

Oh, and 'exercise'

Thanks (2)