Felicity Banks Head of Business Law Institute of Chartered Accountants in England & Wales The Role of Accountants in the Fight against Money Laundering

ICAEW Money Laundering and Terrorist Financing The process by which criminals retain, disguise and conceal the proceeds of their crimes The process by which funds are raised, consolidated and retained for use in financing terrorism

ICAEW Anti-money laundering requirements National law and regulation Regional law and regulation Global requirements

ICAEW Anti-money laundering requirements National law and regulation Regional law and regulation Global requirements The 40+9 Recommendations of the Financial Action Task Force Extraterritorial requirements of major jurisdictions

ICAEW Anti-money laundering requirements FATF Recommendations A pattern of increasingly rigorous requirements, in the interests of international co-operation in the fight against crime.

ICAEW FATF Requirements Due diligence - identifying clients Due diligence - continuing alertness Record keeping Systems and training Suspicion reporting Prohibition on “tipping off”

ICAEW FATF Requirements Suspicion reporting Drug trafficking Terrorism Corruption Other serious crimes Tax evasion?

ICAEW Scope of FATF Recommendations Financial Institutions “Designated Non-Financial Businesses and Professions” (DNFBPs)

ICAEW FATF Recommendations In recent years FATF have been developing Guidance on applying a “risk based approach” to compliance with the 40 Recommendations. - First for banks, then for DNFBPs, including guidance specifically for accountants.

ICAEW Scope of FATF Recommendations Designated Non-Financial Businesses and Professions: - Lawyers and accountants in practice - Trust and company service providers - Real estate agents - Dealers in precious stones and metals - Casinos

ICAEW Scope of FATF Recommendations Accountants in practice are included when assisting clients in: buying and selling of real estate; managing client money, securities or other assets; managing bank, savings or securities accounts; organising contributions for the creation, operation or management of companies; creating, operating or managing legal persons or arrangements, and buying and selling businesses.

ICAEW Scope of FATF Recommendations Lawyers, notaries, other independent legal professionals and accountants should be required to report suspicious transactions [to the proper authorities] when, on behalf of or for a client, they engage in a financial transaction in relation to these activities.

ICAEW Scope of FATF Recommendations Lawyers, notaries, other independent legal professionals and accountants should be required to report suspicious transactions [to the proper authorities] when, on behalf of or for a client, they engage in a financial transaction in relation to these activities. Countries are strongly encouraged to extend the reporting requirement to all the professional activities of accountants in practice, including auditing.

ICAEW Scope of FATF Recommendations Neither legal professionals nor accountants are required to report their suspicions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege.

ICAEW FATF Recommendations – Suspicion Reporting Client confidentiality Can the ethical position of accountants be reconciled with reporting money laundering suspicions? Can an open client relationship be maintained, where there is a legal requirement to report suspicions?

ICAEW IFAC Code of Ethics Introduction and Fundamental Principles distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest.

ICAEW IFAC Ethical Principles (d) Confidentiality A professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties.

ICAEW Client Confidentiality Client relationships Experience in the UK is that client relationships can be maintained – with care. The tipping-off provisions do not stop accountants advising clients that the actions they are taking are illegal, or assisting them to regularise their position.

ICAEW Client and Other Confidentiality Confidentiality and Tipping Off Confidentiality is owed to law enforcement (anti-tipping off provisions) and law enforcement should owe a reciprocal duty of care with confidential information

ICAEW Scope of FATF Recommendations Neither legal professionals nor accountants are required to report their suspicions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege. But can we rely on this, if it is clearly in the public interest to report to the authorities?

ICAEW The UK Implementation In the UK, accountants in practice make around 600 money laundering suspicious activity report a month – Why is this so high? Is it a good thing?

ICAEW The UK Implementation It is high because of: A wide definition of Money Laundering Strong enforcement A belief that the information generated will be appropriately used, for the general good.

ICAEW The UK Implementation It is a good thing if and because: The belief that the information generated will be appropriately used, for the general good, is correct. The danger of future inappropriate use is remote.

ICAEW The Role of Accountants Professional accountants provide relevant information to those entitled to it, enabling them to perform their legitimate functions. All society benefits when fair laws are enforced fairly. Accountants should assist law enforcement by reporting money laundering.

ICAEW MAJOR PLAYERS FATF/GAFI Financial Action Task Force – EUROPEAN UNION crime/index_en.htm crime/index_en.htm INTERNATIONAL INTELLIGENCE ORGANISATIONS The Egmont Group – SOURCES OF GUIDANCE

Presentation by: Felicity Banks Head of Business Law Institute of Chartered Accountants in England & Wales The Role of Accountants in the Fight against Money Laundering