Barrister Igbodekwe Emmanuel TH September, 2013 Special Control Unit Against Money Laundering (SCUML) Regulating The Accountants for AML/CFT Challenges and Way Forward

22 Topic  Financial Action Task Force (FATF) requirements on accountants  Highlight of the FATF recommendations relevant to accountants  Way Forward in regulating accountants

The Financial Action Task Force (FATF) :  an inter-governmental body  created in 1989 by ‘G7’  sets standards, develops and promotes policies to combat money laundering and terrorist financing  published 40+9 Recommendations to achieve its purpose  Now Revised to 40 Recommendations 33

44 Designated Non-Financial Businesses and Professions (DNFBPs) DNFBPs as defined by Financial Action Task Force (FATF) are:  Lawyers  Accountants  Trust and Company Service Providers (TCSPs)  Real Estate Agents  Dealers in Precious Metals/ Stones  Casinos

You Play an Important Role Designated Non-Financial Businesses and Professions (DNFBP) Trust and Company Services Providers Lawyers Accountants Casino Estate Agents Banks Securities House Insurance Firms Dealers in Precious Stones and Metals

66 FATF Requirements on Accountants New Technology (Rec. 15) Accountants – operating individually or in a firm CDD (Rec. 10, 22) Complex Transactions (Rec 20, 21) Record Keeping (Rec. 11) STRs (Rec. 20 & 21) Internal Control (Rec. 18) PEPs (Rec. 12) Special Attention (Rec. 21)

77 FATF Requirements on the Accounting Profession The Accounting Profession Sanctions (Rec. 35) Guidelines (Rec. 34) SRB (Rec. 24)

88 FATF Requirements on Accountants  Customer Due Diligence (Rec. 10, 22, 23)  Record Keeping (Rec. 11)  Suspicious Transaction Reporting (STR) (Rec. 20)  Risk-based Approach Guidance for Accountants (REC. 34) Requirements to be specified in law:

99 When to Conduct CDD? When accountants prepare for or carry out transactions in relation to:  Buying and selling of real estates;  Managing of client money, securities or other assets;  Management of bank, savings or securities accounts;  Organisation of contributions for the creation, operation or management of companies;  Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.

 10 When to Conduct CDD? When accountants act as Trust and Company Service Providers and  Acting as a formation agent of legal person;  Acting as a director or secretary of a company;  Providing a registered office, etc for a company;  Acting as a trustee of an express trust;  Acting as a nominee shareholder for another person.  They have to comply with Rec. 5, 6, 8-11, 21.

 11 FATF Requirements on Accountants Other selected requirements:  Internal Controls (Rec. 18)  Self Regulatory Organisation (SRB) (Rec. 28 & 35)

 12 Internal Controls  To establish / maintain internal policies / procedures to prevent ML / TF.  Policies / procedures to cover CDD, record keeping and STR obligations.  To communicate these to employees.  To develop appropriate compliance management (e.g. AML/CFT Compliance Officer at management level).

INTERNAL CONTROLS  On-going staff training.  Independent audit function to test compliance with the policies and procedures.  To put in place screening procedures to ensure high standards in hiring employees.  The type and extent of measures to be taken should commensurate with:  the level of ML / TF risk; and  the size of the business.  13

 14 SRO – Responsibilities & Sanctions  Government authority or SRB to monitor and ensure compliance with AML / CFT requirements.  Power to sanction in case of non- compliance.  Effective, proportionate and dissuasive criminal, civil or administrative sanctions be available.

SRO - SANCTIONS  Range of sanctions available should be broad and proportionate to severity of non- compliance.  Sanctions should be available to legal persons, their directors and senior management.  15

SRO - RESOURCES  Adequate structuring, funding, staff with sufficient technical and other resources to fully and effectively perform their functions.  Sufficient operational independence and autonomy to ensure freedom from interference.  Staff be of high professional standard & integrity and adequately trained for AML / CFT.  16

 Government authority or SRO to establish guidelines to include the following:  ML / FT techniques and methods; and  any additional measures that accounting firms/accountants could take to ensure their AML / CFT measures are effective.  17

 18  Establishment of Central Co-ordinating Committee (CCC), NRA - CCC  To steer & co-ordinate the strategic development of AML/CFT regime in line with internationally recognised standards. Action by Political Authority

 19  Establishment of  Legal Framework  Institutional Framework  Designation of Institutions with AML / CFT matters and with specific responsibilities on financial sectors (FIUs).  Law Enforcement agencies  DNFBPs and Non-profit Organisations. Action by Political Authority

 20  Conflict of Accounting Concepts  Transparent Disclosure  Wholesome Importation of Principles and Procedures  Independence of Accountants  Legitimacy of Figure Manipulation  Background of Some Accounting personnel  Integrity and Ethical principles

 knowledge of AML/CFT  AML/CFT Displacement  Disregard for good governance and Accountability  Complexity of Practice  Whistle blower  Customer Confidentiality  The culture of get rich syndrome  New technologies Challenges Con’d

General  Political Factors  Economic Factors  Technological factors  Environmental Factor  Legislative Factors Challenges Con’d

 23  Phase I : Financial Sectors  Phase II: DNFBPs  Political Will  Management Will Way Forward Legislation on CDD & Record Keeping

 24  Consultation on Legislative Proposals and Amendments.  Continued reliance on unregulated Third Parties by Financial Institutions. (Financial Inclusion).  AML/CFT included as part of Financial Reporting Standards Requirements. Way Forward Contd…

 25  Step up outreaching activities to raise awareness on AML / CFT and work closely with professional bodies.  Seminars, Workshops,  one-on-one Inter-Face with Stakeholders  Sector Specific Guidelines.  Interactive System Mechanism. Way Forward Contd..

 26 Way Forward Contd..  Timeline  Compliance costs  Regulatory Authority  Bye-Laws (Regulations) Consultation Issues

 Timeline (1)

 28 FATF 36 members Timeline (2)

 29 Internal Control Systems Staff Training Audit Function Policies and Procedures Complianc e Officer Compliance Costs (1)

 30 International Standards Compliance Cost Compliance Costs (2)

 31 Professional Status and Reputation Business Costs and Legal Obligations Compliance Costs? (1)

 32 Compliance Costs? (2)

 33 Open-minded

 34 Partnership

 35 Thank you!