Technical
6 Jun 2019 08:49am

Practice Q&A: money laundering, apprenticeships

Advice for you on how to properly report suspected money-laundering activity, the benefits of apprenticeships, and the pitfalls of client hospitality

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Caption: Illustration by Yukai Du

Q: Should I submit a SAR if I think someone I’ve decided not to work for is laundering money?

A: All chartered accountants in practice have a legal obligation to make a report to their Money Laundering Reporting Officer if they know or suspect that money laundering has taken place. The MLRO must then consider the report, and if money laundering, is suspected, a Suspicious Activity Report (SAR) must be made to the National Crime Agency (NCA). Rejecting a new client because you suspect they are criminals or money launderers may be something that requires reporting to the firm’s MLRO, and the NCA. Your obligation to consider whether you have suspicions of money laundering doesn’t change just because you have rejected the client. There are a number of questions you need to consider: 1. Do you have knowledge or suspicion of criminal activity? 2. Do you know or suspect that someone has benefitted from that activity? 3. Do you think that the person involved in the activity, or in possession of the proceeds of the activity, knew or suspected it was criminal? 4. Can you identify the person in possession of the proceeds? OR: Do you know the location of the proceeds? OR: Do you have information that will help identify the person or locate the proceeds? If you answer yes to all four of the questions above then you should make a report of your suspicions to your firm’s MLRO. The MLRO would then need to consider whether they also have a suspicion or knowledge of money laundering, and whether they know the name of the person suspected, or the whereabouts of any laundered property. A SAR is also required where there are reasonable grounds to know or suspect money laundering. This is an objective test; i.e., the standard of behaviour expected of a reasonable person in the same position. Claims of ignorance or naïvety are no defence. NCA guidance is at:

Sophie Falcon, integrity and law manager, Technical Strategy Department, ICAEW

Q: Our practice is thinking of taking on an apprentice. What are the benefits for small firms?

A: In his Spring Statement, the chancellor confirmed that from 1 April 2019, the government will cover 95% of the cost of an apprenticeship for employers that aren’t paying the apprenticeship levy. So all you have to contribute is the remaining 5%. This means that to offer the ICAEW Certificate in Finance, Accounting and Business (ICAEW CFAB) as part of an apprenticeship, your contribution as an employer could be as little as £400 per apprentice. To offer the ACA, your contribution as an employer could be as little as £1,050 per apprentice. You can therefore potentially train aspiring ICAEW chartered accountants in your firm for as little as £400 (these costs are dependent on your tuition provider and government apprenticeship funding rules). You also don’t have to pay National Insurance contributions for apprentices under 25. For a typical apprentice on a starting salary of £20,000, this would be an approximate saving of £4,900 over the course of a three-year training agreement. Furthermore, if you have fewer than 50 employees in your firm and you’re taking on 16- to 18-year-olds, apprenticeships are fully funded by the government. Graduates, non-graduates and school leavers working in England are all able to apply for an apprenticeship, and ICAEW can help you find high calibre candidates in your area. Your existing employees are also eligible. So there are many cost benefits to hiring an apprentice. But other benefits include enhancing your employees’ skillset, a more diverse workforce, and ultimately future-proofing your finance function.

Alison Stiles, head of business development, ICAEW

Q: Would it be unethical to offer or receive client hospitality?

A: Hospitality should not be accepted unless an objective, reasonable and informed third party would see the value as trivial or inconsequential (FRC Ethical Standard paragraphs 4.61D to 4.65). Many firms set a monetary limit over which hospitality should not be offered or accepted without prior approval from a senior individual. The frequency, timing and intent behind the hospitality, and the perceived value to the parties involved should also be considered. The more frequent the hospitality, the more likely a third party would consider there to be selfinterest and familiarity threats. A meal out with client staff is likely to be viewed as less acceptable if it is prior to the signing of the auditor’s report. If it is ancillary to a business purpose, for example a client meeting, it is more likely to be acceptable. For non-audit clients, the relevant guidance is included within section 260 of the ICAEW Code of Ethics. The same considerations apply, however the requirement is for objectivity rather than independence. Considerations should be carefully documented and the firm’s ethics partner/ethics function should be consulted if there is any doubt as to the acceptability of hospitality offered to or from clients.

David Stevens, professional consultant, ICAEW Advisory Services

Five in brief

01 Brexit Planning

The latest government information relating to the profession in the event of a no-deal exit from the EU can be found on the ICAEW Brexit hub, which is regularly updated.

02 Environmental reporting

Updated guidance to help companies comply with the Streamlined Energy and Carbon Reporting regulations, including greenhouse gas (GHG) reporting is now available.

03 Prospectus regulation

EU Prospectus Regulation (2017/1129) is directly effective in Member States from 21 July 2019. It will replace the current prospectus regime under the Prospectus Directive (PD).

04 LIBOR

Benchmark reform by global regulators will impact upon financial reporting in the next two years, and accountants need to be ready. After 2021, the London interbank offered rate, or LIBOR, will have limited support.

05 GDPR

One year on from when the EU General Data Protection Regulation (GDPR) came into force, ICAEW has produced a guide to explain some of the new or more difficult concepts introduced by the GDPR and DPA 2018.

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