Managing Money Laundering Regulations – A Guide to Compliance
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EIGHT KEYS TO SUCCESSFUL COMPLIANCE
Although the Money Laundering Regulations have been in place now for four years, there is still a large number of practices who may think that they are fully compliant whereas in fact an inspection by the practice regulator may well disclose considerable shortfalls in the provision.
One of the principal areas for concern relates to the provision of training for all client facing staff. We have found that many principals are failing to either arrange training for themselves let alone the staff. The real danger of a substantial fine however arises from the requirement to update the training on an annual basis and very few practices that we speak to are aware of this requirement.
We are therefore providing this checklist to assist Taxation readers with their compliance.
1. Appoint a Money Laundering Reporting Officer (MLRO)
For the majority of Accountancy Service Providers, this will normally be the practice owner, a partner or possibly a responsible employee. The duties of the MLRO are fairly broad and there are some serious fines and/or imprisonment waiting for the MLRO who does not ensure that the practice complies with the remaining parts of the legislation.
2. Provide a statement and manual
The Policy Statement will outline the measures taken in your practice to comply with MLR and specifically will detail the risk-based approach adopted by the practice.
The manual will provide detailed compliance and reporting procedures, levels of exposure to risk and a confidential list of ‘High Risk’ clients, all of which must be available for staff to access and also at the time of an inspection.
3. Provide appropriate training for the MLRO and other staff
Regular training and tests must be carried out with all staff that come into contact with clients (and this includes anyone who may answer the telephone including any casual or temporary staff, spouses etc. Training records, including proof that the MLRO and staff have understood the training, must be retained for five years.
4. Verify clients’ identity
Client Due Diligence (CDD) includes two elements and the first, client identification, has been extended in scope from the previous MLR under which a passport and utility bill were generally considered to be satisfactory evidence. With the increase in doing business at a distance plus the possibility of forging evidence, it is now incumbent upon practices to carry out more thorough checks. The solution is to obtain a report that includes the electronic footprint of the client. This is far easier than copies of documents and as it includes reference to various government files as well as bank accounts etc demonstrates enhanced CDD. It also checks the list of Politically Exposed Persons (PEPs for short). It is probably the only satisfactory method to regularly check your High Risk clients (and, yes, you will have some however well you think you know them!)
5. Assess the risk of your clients being involved in fraudulent activity
CDD includes every client who must be assessed for the risk that they may be involved in ‘money laundering’ or indeed any offence under the Proceeds of Crime Act 2002 and the Fraud Act 2006. Clients who are ‘Politically Exposed Persons’ are automatically regarded as High Risk and other examples will include clients who have knowingly provided incomplete data to enable the correct calculation of tax. If your main area of expertise is, say, bookkeeping and a client asks you to complete annual accounts for a limited company then because of your perhaps limited experience, the client will be High Risk.
6. File reports with the Serious Organised Crime Agency (SOCA)
The MLRO is responsible for registering (NOW if not already registered) and reporting suspicious activity and potential offences to SOCA. The MLRO is also responsible for receiving and forwarding if appropriate, all internal reports from staff.
7. Keep records of all the above
Records must be kept of the practice’s service provision, CDD, MLRO and staff training and all internal and SOCA reports.
8. Ensure you are supervised
Any practice (including part-time) must be supervised to ensure compliance with MLR. There are 22 professional organisations that provide supervision for their members and if you are not supervised by one of these then you must apply to HMRC.
SUMMARY
UK anti-money laundering regime requirements are set out in the Proceeds of Crime Act
2002 (POCA) (as amended by the Serious Organised Crime and Police Act 2005
(SOCPA)), the Money Laundering Regulations 2007 (2007 Regulations) and the
Terrorism Act 2000 (TA 2000) (as amended by the Anti-Terrorism, Crime and Security Act 2001 (ATCSA 2001) and the Terrorism Act 2006 (TA 2006)).
The above eight requirements are a brief summary of MLR2007 which itself is relatively short bearing in mind the effect that compliance will have on your practice. Every MLRO will need help and H M Treasury has approved the following guidance and compliance with the content of these is therefore obligatory. :
•HMRC’s document MLR8 Preventing Money Laundering and Terrorist Financing
•The CCAB Guidance
•ATT/CIoT’s Guidance for Tax Practitioners
These documents can be downloaded from the relevant websites for HMRC, CCAB and ATT.
CONCLUSION
It has been estimated that the average increase in practice overheads is in the order of 2-3% of turnover which is particularly unwelcome news in the middle of recession. However MLR2007 is here to stay and accountants ignore it at their peril!
DISCLAIMER
AMLCC, authors, consultants and editors expressly disclaim all and any liability and responsibility to any member or reader in respect of anything, and the consequences of anything, done or omitted to be done by any such person reliant wholly or partly upon the whole or any part of this article
© P T Harmsworth and AMLCC Ltd 2011
anti Money Laundering Compliance Company Limited
39 Station Road LUTTERWORTH Leicestershire LE17 4AP
Tel: 01455 555 468 Fax: 08458 693 108
email: info@amlcc.co.uk website: www.amlcc.co.uk
