Stay alert, comply with the Money Laundering regulations & report suspicious activity

COVID-19 – preventing Money Laundering/Terrorist Financing in Accountancy Sector Practices

Bookkeeping and accountancy practices and practitioners should be aware that criminals will continue to operate throughout, and look to take advantage of, the COVID-19 outbreak. This includes laundering the proceeds of crime and terrorist financing, so it is important that everyone is aware of the changing risks.

Accountancy Sector Anti- Money Laundering (AML)/ Counter-Terrorist Financing (CTF) supervisors understand the particular challenges currently facing accountancy practices and practitioners. This includes the difficulties associated with undertaking customer due diligence (CDD), including appropriate levels of identification and verification (ID&V) – particularly where clients cannot be met face-to-face

Please note accountancy practices and practitioners in scope of The Money Laundering Regulations 2017 (MLRs) must still comply with their statutory requirements at all times.

However, in line with a risk-based approach, the MLRs provide flexibility in the application of their requirements.  There exist options for practices seeking to comply while also observing requirements such as social distancing.

Risks that may arise due to COVID-19

As well as changes to how we live our lives, COVID-19 is also changing the economy. An economic downturn may make accountancy practices more susceptible to financial difficulties or other pressures, which creates risk and potential weaknesses for criminals to exploit. As the UK economy enters a period of uncertainty, practitioners and practices should be particularly alert to the following risks in new or prospective customers:

  • Being asked to work with unusual types of client or on unusual types of matter
  • Resistance from a client regarding compliance with due diligence checks, for example being pressured to forego necessary due diligence checks or to “speed up” the process.
  • Becoming involved in work that is outside of the practice’s or practitioner’s normal area of experience/expertise – without full understanding of the money laundering and counter terrorism risks associated with the new area of work
  • Transactions where the business rationale for the transaction is not clear.

Always ensure that you are comfortable as to your understanding of the matter, including its purpose and why it is happening in the particular way it is happening.

The IAB provides all supervised Members in Practice with a weekly National Crime Agency (NCA) briefing on developing COVID-19 threats and trends of note – it is important to read these to maintain a current awareness of developing money laundering threats in the sector.

Members in Practice are reminded of their obligation to report any suspicions activity to the NCA via their online Suspicious Activity Report (SAR) portal.  Further guidance on submitting a SAR can be found on the NCA’s website here.

Ongoing requirement to comply with MLRs

As an AML supervisor, the IAB has an ongoing duty to ensure that its supervised members are compliant with the MLRs.  2020 has seen the introduction of a new AML inspection process which will allow us to inspect more members.  The process has continued to develop to meet the challenges of COVID-19 and now includes virtual inspections.  The first quarter of 2020 saw 9 practices issued with ‘action plans’ to address shortfalls in meeting the requirements of the MLRs.  All Members in Practice should read the HM Treasury approved Accountancy Sector Guidance issued by CCAB (CCAB.org.uk) to ensure their practice is compliant with the regulations.

NCA’s SARs in action – March edition

The latest edition of the NCA’s SARs in action newsletter can be found here, providing an update on the NCA’s activity and findings from their work combatting money laundering and financial crime.

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