HMRC’s AML clampdown acts as a wakeup call for accountants

Business definitions: Laundering
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Accountants have been reminded to review their internal AML policies after HMRC slapped non-compliant MLR estate agents with big penalties.

Following a week-long money laundering crackdown, HMRC knocked on the door of 50 estate agents across England in March.

The unannounced investigations of estate agents trading without MLR registration continued HMRC’s public naming and shaming of businesses that do not comply with the regulation.

Unsurprisingly, considering HMRC’s targeting of estate agents, many recent additions to the list are from the sector. The biggest fine of £215,000 went to Countrywide Estate Agents for MLR failures such as conducting due diligence, the timing of verification and proper record keeping.

“Estate agents need to understand that criminals prey on weaknesses, so it’s vital they take all steps to protect themselves,” said Simon York, director of HMRC’s fraud investigations. “The money laundering regulations are key to that, but there’s still a minority of agents who ignore their legal obligations.”

No clean slate for accounting firms

While estate agents took the brunt of the fines, HMRC AML-supervised accountants and tax agents did not get away with a clean slate.

Between June and July 2018, Bradford-based Delta Tax Agents Ltd was hit with a £5,991.85 penalty after HMRC found breaches in carrying out risk assessments, having the correct policies, controls and procedures, and conducting due diligence. At the lower scale, EZI Tax Ltd received a £500 fine for failing to provide requested information.

HMRC said it had carried out more than 5,000 interventions on supervised businesses over the past three years, which has translated into 655 penalties worth £2.3m issued from 2017 to 2018.

Although estate agents were targeted this time around, leading voices from the accountancy profession have warned that the inspections are also a wake-up call for accountants and tax agents.

Being aware of the money laundering regulations are key to this, and that is acknowledged in a recent industry update from the ACCA.  

Speaking to AccountingWEB about MLR obligations, ACCA's head of technical advisory  Glenn Collins said: “There is a legal obligation on businesses to have suitable policies and procedures in place to mitigate the risks of money laundering taking place – and for businesses to act on these when the need arises.

"As an accountant, you should take a step back and think about a businesses’ individual transactions and whether they fall within the AML regime. If they do, then report these to your practice’s money laundering reporting officer. Remember, you don’t have to investigate a suspicion but the onus is on you is to report any suspicion."

He added, "For those accountants not regulated by a professional body, they can expect HMRC interventions to increase over the coming months as it gets better at its supervision around money laundering,”

HMRC is not the only organisation ratcheting up its AML supervision. Accountants in practice are expecting increased AML scrutiny from their institutes after the first report from the Office of Professional Body Anti Money Laundering Supervision. In an excoriating salvo, the supervisor watchdog criticised the accountancy bodies’ lack of robust supervision.

Those needing to brush up on their obligations can start with the ACCA industry update post which reiterates the money laundering guidance issued by CCAB.

It’s difficult to distil the 73-page CCAB guidance into a short paragraph here, but on a crude level you could do no worse than making sure:

  • you have a strict internal money laundering policy and procedure to adhere to;
  • all staff members have an appropriate level of training on how to handle any suspicious money laundering situations and their reporting requirements; and
  • you exercise professional scepticism and judgment at all times

Community reacts

However, some within the AccountingWEB community have questioned the futility of MLR checks and remain sceptical over whether HMRC is actually taking money laundering seriously.

Writing on AccountingWEB, regular reader Ireallyshouldknow said the trouble with AML is “ID checks are largely pointless, and serious money launderers will have ID good enough to pass our tests ... We see little or no results at all from sending in reports of tax dodging, so are reluctant to waste time when our reports are ignored”.

The AccountingWEB member added: “Fundamentally tackling fraud and money laundering is a police matter. They need to take the lead on this, and actually prosecute some people for all the scams that go on, rather than just turn a blind eye.” 

A lot of members echoed this stance, including Lesley Barnes who wrote: “We can follow whatever processes are in place, have all the necessary monitoring by our accountancy bodies but nothing will change until HMRC start to act on our reports.”

About Richard Hattersley

Richard Hattersley

Richard is AccountingWEB's Practice Editor. If you have any comments or suggestions for us get in touch.

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16th Apr 2019 11:13

AML is common sense and most Accountants have been using this method of work for many years. This is primarily a penalty led exercise to boost the coffers. AML came from the EU and was originally intended for criminal activity. Of course, now it's filtered into non-compliance activity. So 1984 has been postponed till 2024. I jest not.

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