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Julia Irvine 23 Nov 2017 10:24am

Accountants too soft on reporting criminal activity

The UK accountancy profession has been accused of not doing enough to help in the fight against money laundering and terrorist financing

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Caption: There just 14 sanctions made per supervisor in 2013/14
According to anti-corruption campaigners Transparency International (TI), between October 2015 and September 2016 accountants and tax advisers were responsible for submitting just 4,000 suspicious activity reports (SARs) – or barely 1% of the total 419,451 received – and the numbers are falling.

TI UK director of policy Duncan Hames questioned why this was, when speaking at a CCAB event, Perspectives on Fighting Economic Crime and Anti-Money Laundering, yesterday.

“When we have discussed the issues, particularly with the accountancy sector in the past, too often the discourse around the contribution of accountants as either gatekeepers or enablers fails to get beyond the role and expectation of company audits.

“But we all know that the work of accountants and accountancy businesses, both large and small, is much broader than that. From company formations to tax planning, from outsourcing to advising on major transactions, where large sums are at stake, who wouldn’t seek the comfort of having an accountant run their eye over the figures?”

He pointed out that the Financial Action Task Force identifies key risks for the accountancy sector services as financial and tax advice to corrupt high net worth individuals and politically exposed persons; the creation of corporate vehicles and other complex legal arrangements such as trusts to disguise the links between the proceeds of a crime and the perpetrator, and performing financial operations on behalf of criminal groups.

“Which leads me to the fundamental question, which I would like us to confront. Given that picture, why are barely 1% of the suspicious activity reports filed in the UK filed by accountants and tax advisers?”

He also asked why, when there were 14 supervisory bodies in the sector supervising 23,000 businesses, were there just 14 sanctions per supervisor in 2013/14 and why were none of the bodies provided complete enforcement statistics or details of important cases “as is standard elsewhere”?

“I would also ask you whether those sanctions themselves are much of a deterrent. What chance that a prospective customer or even an employer will successfully check or identify past professional standards actions before engaging with those supervisors’ members?”

“It seems to me easier to check a plumber’s qualifications or the cleanliness of a café than to spot an accountant that has been banned by their professional body. Why isn’t such accountability a priority for accountancy AML supervisors?”

Donald Toon who is a director of the prosperity unit at the National Crime Agency, agreed. He quoted the Treasury’s 2015 and 2017 National Risk Assessment, which identified complicit accountancy professionals as high up on the list.

Toon highlighted collusion with other parts of the regulated sector, creating structures and vehicles that enable money laundering, provision of false accounts, failure to identify suspicious activities, failure to submit SARs and very mixed standards of regulatory compliance with no barriers to entry from some parts of the profession.

As an example, he described a case where a professional body of accountants acting as a supervisory body failed to spot a number of red flags. One of its members was a joint director of a UK-registered company, supposedly set up to offer high value leisure services, with a Russian national. They used the company to move $60m through jurisdictions including Russia, Cyprus, Latvia, the Czech Republic and the British Virgin Islands.

There are people within the accountancy profession who were absolutely prepared to engage in providing professional services to serious and organised criminality, Toon said, although he stressed that they were few and far between.

“Nobody is suggesting that the profession as a whole is corrupt but every large profession, every large organisation includes its bad apples.

“There is a real issue that we need to quite clear about. While we may be talking about a small number who are complicit, complex money-laundering schemes cannot operate effectively without the skills and the veneer of legitimacy provided by the professional sector, particularly accountancy, trust and company services provision and the legal sector. Some will be directly involved, some will be careless, some will simply fail to spot and understand risk.”

Both Toon and Hames called for improved collaboration between the authorities and the profession and Hames, himself a member of CIMA, urged the profession to develop a greater sense of urgency.

“In our global economy dealing with a global problem like corruption requires action here at home in the UK. The scale of the damage that has been done through the use of UK companies is still being counted. It could well total in excess of £100bn,” he said.

“Though much of what has led to this money being obtained – embezzlement, bribery, illegal kickbacks – will have taken place abroad, it has been facilitated often by activities taking place in plain sight, right here in the UK.

“We should not ignore this problem or leave it for others to solve. I believe it is both within our means and capabilities to end the involvement of UK businesses in global corruption.”
Action, he added, is now urgent.
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