From XU Magazine, 
Issue 32

4 AML traps, and how to avoid them

This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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As accountants, you’re effectively gatekeepers of the whole financial industry. You’re a trusted, respected and vital profession worldwide. But this also makes you a prime target for money laundering criminals, so you need to make your AML procedure watertight.

In fact, failing to comply with AML is one of the only things in your business that can lead to prison.  

That’s of course, only in extreme cases, but add the fact that fines for non-compliance tripled in 2021, now is the time more than ever to get your AML system in check. 

But, it isn’t the time to panic. In fact, with more options to automate AML than ever, it’s also the easiest time to do so. 

More on that later, but first, here are 4 common traps our compliance expert, Valerie Steward, and other leading authorities on AML, identified that accountants fall into, and how we can help you to avoid them. 

Trap 1: Accountants not incorporating AML into ongoing client work 

Picture the scene: you onboarded a new client. You did all the necessary checks on them and identified them as an enhanced risk because their business is cash intensive. You took the relevant actions to mitigate the risk and felt confident to start work with them.  

Before you know it, life happens, you blink, and you’re two years into your working relationship with them.  

Have you been reviewing them consistently, performing regular risk assessments? Could you prove to your governing body that you’re constantly assessing the risk of that client? Or could you be unaware that you’re complicit in a client’s money laundering antics?  

It is commonly forgotten that risk assessments don’t just affect initial checks with a client, but they also impact ongoing work with them. For example, are you constantly scrutinising transactions, and checking the margins seem reasonable for a business of this nature?  

Your AML safety net 

Scenarios like the above might rarely have disastrous consequences, and I’m not trying to scare you. But they are easy to avoid when AML checks and risk assessments are done consistently. Avoid this by investing in reliable AML software. It should prompt you when a risk assessment is due on a client, whether the relationship is old or new. It will also be kept up to date, with guidance and support to help you understand the ongoing implications 

Trap 2: Lack of ongoing monitoring  

What about your clients who aren’t initially deemed enhanced risk at the start of the relationship? Accountants we spoke to cite the upkeep of risk assessments as a major pain point.

Ongoing monitoring falls into two categories: 

1) A general annual review of the assumptions you’ve made about a client via a risk assessment 

2) Monitoring of specific events, such as a change in business director or change in the way you provide the service will require a new assessment on how this will impact your AML process with them

Your AML safety net

Ongoing obligations are just as important as onboarding procedures. Don’t leave them to chance - keep on top of these by systemising your ongoing anti-money laundering process. 

Trap 3: Blind spots on enhanced risk clients 

Guidelines to what constitutes a high-risk client can be ambiguous. An obvious high-risk client might be a political figure, for example. But drill further down, and many enhanced-risk clients are more difficult to spot.  

Let’s take the example of a family friend working in a cash-intensive business. You feel you know them, you might have even gone to school with them. But while you can vouch for their identity, you must treat their business as objectively and fairly as you would a stranger in a cash intensive business.

Your AML safety net 

We strongly advise you don’t treat their business any differently to one of a stranger.  ‘How can I do that without offending them?’ You might wonder.

Integrate your risk assessments and AML checks into your initial proposal to set the boundaries within the relationship from the start.   

Make it clear that it’s part of the parcel you’re offering by letting the proposal do the talking for you. Having it stated in black and white shows your professionalism and negates any awkward conversation. 

Trap 4: Accountants see AML as a box ticking exercise 

Governing bodies reported this as a recurring problem among their members. The truth is, no one likes doing AML. It’s seen as a necessary evil you can’t profit from. But the risk of not doing your AML checks correctly far outweighs the cost in time it takes you to do it.  

Your AML safety net

How can you stop AML checks feeling like a bore that’s getting in the way of the real, profitable work you do for your clients?   

There’s no avoiding doing them... but by automating them, and integrating them into your onboarding procedure, they’re no longer the time-consuming bore they once were. 

With phase one of GoProposal AML now live, you can conduct your KYC checks and Risk Assessments in record time. 

Drop down, multiple-choice questions will guide you through assessments with ease, ensuring you’ve considered everything that needs to be considered, while saving you time as the intelligent software adapts what you’re asked based on your previous answer. You’re presented with one question at a time, enabling you to answer each one carefully, without overwhelm. 

We’ve integrated AML into our app, creating a seamless, clean onboarding process for members and their clients, in which proposals, engagement letters, risk assessments and KYC checks can all be completed.

Why leave it there?

To find out more about GoProposal

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