Accountants and bookkeepers are legally obliged to follow anti-money laundering (AML) rules as criminals and fraudsters often target their firms for money laundering – which makes money generated from illegal activities look legitimate and “clean”. But while many in the profession know that it’s important to prevent, recognise and report money laundering, many accountants are leaving themselves vulnerable because they lack detailed information about AML.
Client checks and documents
We know you know this already – but it is important to know your client, and be able to verify that they are exactly who they say they are. These checks should be carried out at the very start of your business relationship, before you carry out any work, and performed again after appropriate periods of time. Most Senta clients set a reoccurring task to remind them to update the checks every 12 months.
Using software to assist you with some of the checks you need to do can make your AML obligations easier, and quicker. Senta’s practice management software, for example, has a built-in credit check function which integrates with Transunion.
Assessing potential risks
Some things you need to consider when conducting a risk assessment on your client are:
Your client’s geographic location. Are they based in an area of high risk? (for example, countries identified as having ineffective counter money laundering systems, significant levels of corruption or terrorism or financing of terrorism)
- Is there anything unusual about the client’s choice of you as accountants/auditors/tax advisors?
- The size and structure of your client’s business – is the corporate structure unusual or excessively complex?
- Do you have any concerns as to why you have not been able to physically see the client face to face?
- Client behaviour, sources of funding, and any unusual transaction patterns
- An understanding of the risk levels associated with certain business transactions and relationships.
Stay on top of practice compliance
Staying on top of your practice compliance is also crucial for identifying and assessing the overall risk that your firm could be used for money laundering. Consider the types of clients you work with. You can use Senta to categorise your client list, identify high-risk clients and assign them to more senior members of your team.
Think about the products and services that you offer. Are they open to abuse by criminals? You can use a practice management tool such as Senta to understand which services you’re offering to which clients, and assess overall risk.
As part of your AML practices, it’s also important you develop firm-wide procedures, policies and controls to reduce the risk of money laundering, which detail what to do if it’s detected. Think about where these policies are documented and how they’re made clear to new members of staff.
AML should also inform your decisions around the delivery channels and payment processes your firm uses – including intermediaries, agents and online services.
Reporting suspicious activity
The UK government states that a practitioner must send a Suspicious Activity Report (SAR) to the National Crime Agency if there is any suspicion at all that a transaction relates to money laundering (or terrorist financing). Advice can be sought from your accountancy body and/or AML supervisory bodies if needed.
Where possible, the SAR should be sent before the suspicious transaction is made – but if your suspicion is raised after the transaction is completed, a SAR must be sent at the earliest opportunity.
Checks and documents you may need include:
- A document confirming identity such as a passport or driving licence
- A document confirming address, such as a utility bill
- A check on who is the beneficial owner, officer or manager (BOOM) of a business or company
- Criminal records check on directors
- A politically-exposed persons check
- A way of establishing your client’s sources of funds, business activities and/or legal structure
- Credit checks
- Company director disqualification checks
Documents or copies should be stored securely and in compliance with relevant data protection regulations - Senta can help with this!
AML in practice: Rowdens
Penny Rowden co-founded Chichester-based accountancy firm Rowdens Limited with her husband. The firm’s clients consist mainly of family-run, owner-managed businesses based locally and across the UK. Complying with anti-money laundering obligations can be time-consuming and onerous – “really hideous”, as chartered accountant Penny puts it – but necessary.
Explaining to new clients why so much personal documentation and checks are required is easy enough, Penny explains, because it’s a legal requirement: “We cannot act for a client unless we have the required documentation under AML regulations – so we’ve built that into our systems. We use Senta’s practice management software, and have included it as part of the client onboarding task list. We usually meet clients face-to-face as well, so we can verify they are who they say they are. However, during lockdown, we had to meet them remotely over Zoom and ask them to show their passports before they sent their passport and other required documents over to us. We store the required information in the software on the basis that it is secure.”
Penny says the AML check on clients is performed annually: “We have an annual check built into our Senta task list for each client – so once we’ve finished the year-end accounts, the task is to carry out a re-check under our firm’s AML procedures, just to review it and make sure nothing’s changed. Luckily, our clients haven’t been involved in money laundering, although once we had a client whose finance director was discovered to be committing fraud. We reported it, but the one thing we had to be really careful about is that we didn’t alert them in any way.”