Dirty money: Flag It Up

I’ve believed for some time that economic crime – specifically fraud and money laundering – is the next big challenge coming down the line for British business. That’s not to say it isn’t already.

The House of Commons Treasury Select Committee recently published the report of its year-long inquiry into economic crime in the UK. The report offers some chilling conclusions around money laundering and makes a number of recommendations – perhaps most notably that the UK has an inadequate and fragmented approach to anti money-laundering (AML) supervision, and that government needs to review it more frequently and more holistically.

Last week, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) published the themes from its assessments of AML supervision by Professional Body Supervisors (PBS’s). Among the findings are a significant lack of appropriate governance arrangements for effective supervision, and a lack of risk-based approaches by PBS’s to the supervision of their members in this context. Nearly a quarter of relevant PBS’s have no form of AML supervision at all in place.

ICAEW supervision

I should note that the aggregation of results in the OPBAS report leaves open the possibility that ICAEW has had significant failings in its own report, which is not correct.

The report also fails to provide important context; the vast majority of money paid into client accounts in the UK is paid into solicitors’ accounts, not to accountants. There is also scant evidence of regulated professionals – the ones over whom OPBAS has oversight – engaging in criminal activity, which is why there have been no recent enforcement actions. The indications are that any money laundering activity among accountants originates in the non-regulated sector.

ICAEW’s quality assurance reviewers undertook checks on AML processes during 2,000 firm visits in 2018, and we run educational initiatives to help our members understand their obligations under the Money Laundering Regulations.

Scale and complexity

While the exact scale of economic crime in the UK remains uncertain, we know that it is vast. Estimates range from the tens of billions to – as the Select Committee report puts it - ‘probably the hundreds of billions’.

Given the sophistication with which much of this ‘dirty money’ is processed, it is inevitable that some of it, at some point, comes into contact with finance professionals.

This does not indicate widespread failure – by definition, laundered money involves clever concealment of its illegal origins, and thus professional involvement is usually unwitting – but it does mean that as chartered accountants we can be the first line of defence against this scourge.

ICAEW Chartered Accountants have a duty to act to the highest professional and ethical standards; we provide our members with codes, guidance, regulations and advice to enable this. But these standards must be complemented with greater intelligence from law enforcement if we are to remain properly alert to instances of money laundering.

‘Flag It Up’

We’re working with the UK Government, along with the legal and property sectors, on 'Flag It Up' - a campaign to promote best practice in anti-money laundering compliance and reporting suspicious activity.

I highly recommend members visit the ‘Flag It Up’ website and take advantage of the extensive information and resources available. This includes important guidance on how to submit a Suspicious Activity Report, should you feel the need to do so.

The increasing magnitude of money laundering, and the current inconsistency in our national response to it, mean that widespread collaboration between professional bodies and law enforcement is now crucial. We all need a better understanding of the problem in order to properly resource and direct measures to tackle it.

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