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Accountant excluded after making up AML policy | accountingweb
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Accountant excluded after lying about AML policy

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An accountant’s 40-year career is tarnished after he created a document that falsely claimed that his AML policies had been in existence since 2018, when in fact they had not. 

20th Mar 2023
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Hans Chung Han Hung was excluded from the Association of Chartered Certified Accountants (ACCA) following a long-winded process. The accountancy body tried to organise a time for an anti-money laundering (AML) monitoring visit, and when he eventually co-operated, he falsely told an ACCA AML supervision officer that his AML policy was created in October 2018. 

Chasing the unresponsive accountant

ACCA first contacted Hung about setting a date for a monitoring review in August 2020, but rather than completing the review within 15 working days as planned, the compliance officer spent the next few weeks trying to get a response from the former ACCA member. 

First the compliance officer sent another email to Hung at the start of September 2020 after they didn’t get a response. A week later they called the office and spoke to an employee who said they’d pass on the message, but it wouldn’t be until days later when Hung replied to the email and agreed on a time.

There were then further delays because Hung failed to provide the requested documents, which led to the monitoring review having to be rescheduled, and then rescheduled again after the compliance officer couldn’t track down Hung again. 

Where is the original AML policy?

After having received some documents at the end of September, the compliance officer conducted the telephone review on 2 October 2020 and followed up asking for additional documents including the firm’s AML policy and procedures document. 

The compliance officer asked for the original version of the AML policy created in October 2018. Hung claimed that no updates had been made to the February 2020 document and said that after reviewing the firm’s AML policy there was no need to make any changes to it.

But as the ACCA case presenter pointed out during the disciplinary tribunal, the AML policy document could not have been created in October 2018 because it was in the form of ACCA’s technical factsheet “anti-money laundering (AML) policy and procedures”, which had only been published by ACCA in February 2020.

Hung admitted before the disciplinary hearing that he had acted dishonestly when he claimed the AML policy had been in place since October 2018. 

AML breaches

Aside from the obvious questions around the AML template, the compliance officer crossed red marks across a lot of what Hung had to share.

The failures included a lack of evidence of:    

  • a firm-wide risk assessment
  • AML training to relevant staff
  • the firm’s criteria for different risk ratings.

For the final bullet point, some clients of the firm had been assessed as “medium risk” when they possessed one or more of the high-risk factors listed in the firm’s AML policy and procedures document. 

Wrong AML processes

The investigator also flagged that the simple yes/no AML template used by Hung didn’t provide an assessment of the risks the firm faced or the actions to take to mitigate those risks. 

It was also found that the template wasn’t tailored to the firm’s AML processes and lacked any details of the firm’s day-to-day processes but did include processes not relevant to the firm. 

There were other discrepancies with Hung’s AML policies, including not completing who the nominated officer was for the firm and not providing details of the tropics covered in the staff AML training – and if the staff had even received the required training. 

Despite giving an extension to follow up on the actions of the report, the case officer didn’t hear from Hung. 

Highest sanctions

When it came to the tribunal, Hung’s defence was that his clients were mainly Chinese takeaways and restaurants and as someone with 40 years in accountancy, he always tried to uphold the standards of the profession. 

The disciplinary committee decided Hung fell foul on two counts. The first was Hung’s lack of co-operation during the AML review, which the committee said means ACCA’s ability to regulate members to ensure proper standards could be “seriously compromised”. 

The other failure was Hung’s breach of the AML regulations. 

Together the committee concluded that these failures showed a “disregard for his regulator, undermined the integrity of ACCA’s review and had brought discredit to him, the Association and the accountancy profession”. 

The committee took into account Hung’s unblemished forty-year career as an accountant and his difficult personal circumstances at the time of the investigation, but the overriding factor still remained: he had deliberately lied and attempted to mislead the regulator. 

The committee decided that Hung’s dishonesty and AML breaches reached the highest threshold of sanctions and excluded him from membership of the ACCA and ordered him to pay costs of £6,000. 

Alison Wood, an associate from Blake Morgan said:

“AML compliance is an important issue for accountancy regulators and we act in many cases where issues with AML compliance form the basis of misconduct allegations. Sole practitioners are often the subject of these allegations and can understandably consider it unfair that the rules apply to them in the same way as they do to much larger firms, with far greater resources. However, the size of a firm does not have any bearing on the necessity to comply or, perhaps most importantly in these cases, the importance of evidencing such compliance.   

“In this case, Mr Hung attended the hearing but he was not represented and he admitted almost all of the allegations in their entirety. It appears Mr Hung was provided with a number of opportunities to correct and provide missing or incomplete documentation following his compliance review, but he frequently failed to respond to these requests, despite extensions of time being given.

“Any proven failure by a member to co-operate with their regulator will not go down well with the committee. However, proven dishonesty will in most cases result in the highest sanction – exclusion from membership. Mr Hung fully accepted his dishonesty at the hearing. He referred to health issues but did not provide an explanation as to why he had misled the regulator although he did say he was ashamed of himself. Notwithstanding this, it is difficult to see how any alternative outcome could have been reached given the facts of this case as set out in the ACCA's report. 

“The case should serve as a good reminder for all accountants, particularly sole practitioners, to fully review their compliance with anti-money laundering regulations. While costly, a review of AML compliance with an independent expert can prove invaluable and can save costs in the long run if it can avoid an investigation by the regulator.  If members are subject to an investigation or there are concerns following a compliance review, it can also be helpful to seek advice early to avoid exacerbating the situation.”

Blake Morgan’s accountancy regulatory team is available to assist with any disciplinary, regulatory and compliance matters arising in the accountancy profession. Click here if you require any of their services.

Replies (37)

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the sea otter
By memyself-eye
20th Mar 2023 17:41

Before I quit all this, the one thing I loathed above all else was being made responsible for the government's failure to police crooks/oligrachs/launderers/criminals/shysters/ne'r do wells generally.
To have to 'do' MLR on clients I had known for decades used to p*ss me off no end.
The man Hung, was truly 'hung out to dry'

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By Hugo Fair
20th Mar 2023 18:42

The crime?
"the committee concluded that these failures showed a “disregard for his regulator, undermined the integrity of ACCA’s review and had brought discredit to him, the Association and the accountancy profession”. "

So no-one was harmed and no financial/tax fraud was committed - but the ego of the ACCA was bruised and that is unforgivable!

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By ireallyshouldknowthisbut
20th Mar 2023 19:33

Depressing read. Clearly you should not lie or give the ACCA the run around, but the matter on which they were being given the run around is quite frankly paper chasing rubbish which serves no real purpose on the ground in a small practice. Either you are looking out for dodgy clients, or you are not.

Spending a day tailoring a document and sticking it on file is tick box compliance and wont change anything day to day.

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Replying to ireallyshouldknowthisbut:
By ireallyshouldknowthisbut
21st Mar 2023 18:09

I should add, for comedy effect, my AML procedures is in a file called "RegulatoryBollox" [albeit the sweary version]

And as the ICAEW AML "policy and procedures" template has a section where you have to link it to your Firm Wide Risk Assessment, my official AML procedures has the link:

///myfirm/admin/AML/regulatorybollox/FWRA.pdf

I look forward to an interesting chat to the ICAEW next time I am up for a review.

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By paulwakefield1
21st Mar 2023 08:11

What a depressing report. The only bright spot I could find was a rather fun typo:

" and not providing details of the tropics covered in the staff AML training". Nothing like a bit of overseas training in sunnier climes.

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By Self-Employed and Happy
21st Mar 2023 09:58

If you are going to "charge" people with not complying to procedure then at least make Accountant a protected title only to be used that are qualified.

Otherwise what is actually the point of ACCA / ACA?

What I find hilarious is that Solicitors / Accountants / Banks and many others carry out AML, so it is a duplicated process many times over with no actual central database.

Government should be doing this, then once people are verified every 3 years BY GOVERNMENT they are given a reference number that they then share will all of the professionals working on their behalf.

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Replying to Self-Employed and Happy:
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By BryanS1958
21st Mar 2023 10:10

I agree, it is nonsense that everyone is performing AML. HMRC should be first to do AML - you shouldn't be able to get a tax reference or NI number without proving your ID and address. Then, the tax reference/NI number should be required for any material transactions e.g. you shouldn't be able to sell a property without it.

Banks and solicitors should then check AML for any high value/suspicious transactions. By the time it gets to accountants, we should be able to take comfort from the fact the everyone up the line has checked AML in relation to the person/entity and the transaction. We should only concern ourselves if accounts, etc contain material levels of cash transactions and so on.

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Replying to Self-Employed and Happy:
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By unclejoe
21st Mar 2023 11:06

Surely the criminals seek out accountants that are not qualified or members of a professional body.

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Replying to unclejoe:
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By justsotax
21st Mar 2023 11:25

I suspect most 'criminals' don't seek out accountants......although where they do i suspect they go to qualified high profile accountants in order to legitimise their 'business'.

Believing AML is a problem that exists only for one man band/bedroom accountants is naive....

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Replying to justsotax:
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By RogerMT
21st Mar 2023 11:45

We don't think it's a problem that exists solely for one-man bands, but bigger firms are better equipped to cope with the burden. As ever, the burden of compliance is disproportionately weighted towards the smaller firms.

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Replying to justsotax:
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By Max Maxwell
21st Mar 2023 12:21

justsotax wrote:

I suspect most 'criminals' don't seek out accountants......although where they do i suspect they go to qualified high profile accountants in order to legitimise their 'business'.

Believing AML is a problem that exists only for one man band/bedroom accountants is naive....

In addition to going to high profile accountants, they also seek the help of the Big Banks to launder their loot!

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By alltaxedout
21st Mar 2023 09:59

AML procedures serve little purpose in a small practice. I wonder how many small practices have discovered a criminal through these procedures. I'll suspect pretty much zero. Any criminal worth their salt will be able to circumvent these procedures.

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Replying to alltaxedout:
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By justsotax
22nd Mar 2023 10:37

As ever is the case (see obligation to register trusts), those who wish to evade tax/be criminal will simply not play by the same rules......

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By RogerMT
21st Mar 2023 10:35

"While costly, a review of AML compliance with an independent expert can prove invaluable... " These people have no idea how sole practitioners work, do they? We are increasingly burdened with frankly unnecessary compliance that serves no real purpose, and takes much time and therefore money to complete. The idea of paying a consultant an exorbitant fee to tell you how to better tick a box is frankly laughable.

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Replying to RogerMT:
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By raju m
21st Mar 2023 11:16

It is all about tick boxes. Tick, tick and tick. raj mehta

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Replying to raju m:
paddle steamer
By DJKL
22nd Mar 2023 23:02

Well, a lot of us started our professional lives ticking- substantive tests, compliance tests, tick, tick, tick. (one could always brighten the day using lots of different colour pens)

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By tracey2412
21st Mar 2023 10:48

Couldn't agree more with all of the comments so far. And so pleased to realise I'm not alone in my opinions.
I've been subject to AML audits by HMRC twice. It's a box ticking exercise at their end & I'm an easy target. My clients couldn't be less risky if they tried. I have stopped 'doing' bookkeeping (I'm not an accountant even) & now only set up online accounts systems & teach how to use it for daily transactions but that still comes under AML so I have to pay my £340 a year, pay to do verification of IDs & tick boxes on my own forms to satisfy the rules in case I get a subsequent check. Or I might get fined or prosecuted.
They'd do better spending the money to make the HMRC online systems more stable & robust & efficient & make sense!

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By justsotax
21st Mar 2023 11:27

the recent case in OFSTED provides a sobering reality of those who merely make the rules for others follow....but don't have to deal with those very rules....

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By Calculatorboy
21st Mar 2023 11:31

AML procedures for small owner controlled practices are a complete waste of time and energy. Most practitioners can smell a crook a mile away. They don't need silly templates and manuals that look like they've been designed by students who've heard about money laundering but have zero experience of it. AML is just another made up industry like data protection for which we pay the costs.

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By Software Seeker
21st Mar 2023 11:39

And no doubt the loss of the jobs of his employees, given his exclusion (unless he carries on practicing unregulated). Obviously no excuse for lying, and ignoring their requests no doubt didn't put him in a great position, however it does sound like a wounded dog being forced into the corner of the room. I've come to accept that AML is just another necessary evil of being in practice, so reluctantly comply.

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By carnmores
21st Mar 2023 11:46

in 3 weeks' time I will enter my 70th year and in 4 weeks time will mark the 50th anniversary of taking Articles with a firm near the Monument. The changes have been phenomenal from the abolishing of the audit for the small companies, the introduction of various strange accounting standards (CCA anyone, is it on the way back?), self assessment (a good thing) and AML: the last is the most pernicious and the biggest failure of the lot. A sledgehammer to crack a nut, as mentioned above checking on a client you have been acting for ages is pretty pointless while the likes of swiss banks play little heed. blah blah blah Institutionalised madness

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Replying to carnmores:
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By raju m
21st Mar 2023 15:44

I totally agree with your comments. Accounts layout for companies now a days seems to be useless. MTD is a nightmare. 3 monthly MTD Tax Returns will be a complete and utter disaster. Raju M

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David Winch
By David Winch
21st Mar 2023 15:42

Well I'm bound to say that this ACCA member could have better navigated the perils of his AML compliance review! Lying to the regulator & getting caught doing it is inevitably going to result in a red card.
Frankly I would also be concerned that many of his clients were apparently fast food takeaway outlets, because I would regard these as relatively high risk cash traders from an AML point of view.
No doubt he could have retained his ACCA membership if he had dealt with his regulator more sensibly - but I do have some sympathy with the other commentators on here regarding the cost/benefit of the AML regime for accountants.
David

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Replying to davidwinch:
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By Paul Crowley
21st Mar 2023 16:52

I agree on the food outlets.
I would also agree with 'Turkish' barbers, were it to be mentioned. My town has just so many. Yet the prior barbers do not seem to be losing business.

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Replying to davidwinch:
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By justsotax
22nd Mar 2023 10:48

I await the time when passing your driving test obligates you to report anybody you think/may have been speeding. Then watch as the report is not acted upon, whilst speed patrols are set up outside schools to catch people going 23 in a 20, at the weekend, because that's easy meat.

Meanwhile those doing 50 in a 30, 100 on the motorway etc go on with their day because the relevant authorities find it harder to target them.

But hey, I am sure ACCA etc do ok out of the AML fee....

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the sea otter
By memyself-eye
21st Mar 2023 17:19

Food outlets are not going to be bothered about 'MLR'. They might be bothered about a visit from an inspector, or not, as the chances of that are vanishingly small.
I live opposite two retired VAT people. The wife told me years ago that they were only ever interested in the top 70% of businesses. I doubt it's even that much these days.
Like all law, there more you legislate, the harder the enforcement, the harder the enforcement the more resources you need, the more resources, the harder to get hold of them.
Keep it simples stupid- fat chance!

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Replying to memyself-eye:
David Winch
By David Winch
21st Mar 2023 17:24
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Replying to davidwinch:
By ireallyshouldknowthisbut
21st Mar 2023 18:13

@David that is some understatement.

An existing client started one...........but apparently made no money........and banked little cash.....I had to suddenly become really busy and couldn't finish the return.

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Replying to davidwinch:
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By Paul Crowley
21st Mar 2023 22:17

Both the Aps could be given the obligation to report turnover of clients. Just once a year will do.
That would probably pick up more tax evasion than any MTD nonsense will ever achieve in a generation.

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By indomitable
21st Mar 2023 17:42

AML a sledgehammer to crack a nut!

I can only agree with all the comments on here. How much do all these processes prevent money laundering and fraud? I would bet very little

And who remind me designed the BBL scheme which resulted in losing Billions in fraud?

Did anyone in government lose their jobs or their livelihoods like this Mr Hung for a daft policy?

No fraud was even proved here just non compliance to a box ticking exercise.

Oh and the lies Mr Hung told! Enough said about this one! Seems to me the 'little guys' get shafted whereas the 'big fish' get away with it.

Maybe he should have used Boris's defence - Well I know I misled the ACCA but I didn't intend to!

ACCA should be ashamed of themselves

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Replying to indomitable:
By ireallyshouldknowthisbut
21st Mar 2023 18:14

More like using a sledgehammer to dig a tunnel.

Completely wrong tool. Lots of effort, virtually no result.

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By garforth
22nd Mar 2023 10:44

I agree with all the comments re absurdity of the whole thing but I really cannot imagine any of his clients having the remotest interest as to whether he has FCCA after his name or not. Enjoy your freedom Mr Hung and have a little holiday on the money that you will save in not having to pay fees to keep ACCA going.

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Locutus of Borg
By Locutus
22nd Mar 2023 12:56

Of everything in the profession, the whole money laundering circus is the most tiresome and increasingly bureaucratic.

To be seen to be compliant, you have to either buy a money laundering policy from Mercia / others (which is barely even read) or spend hours writing out one. Either way, it doesn't *really* do much about money laundering - it's just show for the regulator.

I risk assess my (mostly professional service business) client base - again for show.

I seriously wonder to what extent real money launderers and fraudsters are even inconvenienced by all of this, let alone prevented. Whenever I have made SAR reports, etc. for clearly fraudulent entities that I have come across, they seem to go ignored. You only have to walk along Oxford Street to see the number of dodgy American Candy Stores hiding in plain sight, that are obviously a front for some sort of illegality, but seem to continue untroubled for years. Then behind closed doors, you have the tens of thousands of murky entities, such as complex trusts, often offshore, where even larger scale money laundering occurs.

It feels like a need by those in power to be seen to be doing something (i.e. handing out lots of ineffective regulations to the regulated sector), but not actually doing anything to tackle the real money laundering that undoubtedly occurs.

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Replying to Locutus:
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By Hugo Fair
22nd Mar 2023 18:19

Mind you, if you thought AML was arduous/expensive/pointless ... just take a look at what's waiting around the corner:

* The Economic Crime Levy (ECL) is an annual charge on entities who are supervised under MLR and whose UK revenue exceeds £10.2 million per year.
Affected entities will have to:
- register for the ECL;
- submit a return every year; and
- pay a fee every year (with first payment due by 30 September 2023).

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Replying to Hugo Fair:
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By carnmores
22nd Mar 2023 18:51

OUCH

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Replying to carnmores:
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By carnmores
22nd Mar 2023 19:30

Aha min £10k upto £250k for huge business, wonder what the expected yield is

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By Max Maxwell
23rd Mar 2023 13:14

I agree that lying to the regulator was a serious error of judgement, and he should have just held up his hands and he woul;d have probable been fined and asked to improve his systems (but then this is the ACCA...if it was up to them, they would have prefered to hang him in public literally!)

We are now living in an era where if you lie to the regulator you are expelled and your livelyhood ruined, but if you are a politician, you can lie to parliament and the whole country, and you can still continue to be an MP and even have another chance of becoming the PM!

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