Accountants are at high risk from abuse of their services for money laundering purposes, particularly from 'high end' clients, according to a new national risk assessment report into the money laundering and terrorist financing risks faced by the UK, released by the government
As part of measures to improve the effectiveness of anti money laundering rules (AML) in the UK, the goverment plans to launch a comprehensive action plan to strengthen the UK’s regime, particularly looking at ways to identify abuse by 'high-end' money launderers, who it says often hide their activities by using professional services firms such as lawyers and accountants to handle their affairs, including complex offshore interests.
The announcement builds on the steps that the government has already taken to improve its anti money laundering (AML) and counter terrorist finance (CTF) regimes.
The National Risk Assessment (NRA), which is the first of its kind in the UK, draws on data from UK law enforcement and intelligence agencies, anti-money laundering supervisory agencies, government departments, industry bodies and private sector firms.
The report highlights the role of accountants and lawyers in ‘high-end’ money laundering, stating that ‘the size and complexity of the UK financial sector mean it is more exposed to criminality than financial sectors in many other countries, including abuse enabled by professional enablers in the legal and accountancy sector’.
Accountancy service providers are rated as a ‘nine’ and identified as one of the sectors most likely to be vulnerable to exposure to money laundering, higher than banks at ‘six’ and legal service providers and estate agents at ‘seven’. Law firms, accountants, banks and money service businesses are ranked as high risk businesses when it comes to exposure to money laundering.
The lack of transparency around these high net worth activities is problematic and the government says that ‘UK law enforcement agencies want to know more about the role of the financial and professional services sectors (banks, legal, accountancy and trust and company service providers) in money laundering. They judge the threat in these sectors to be significant, and are still establishing the strength of understanding needed in this area’.
It also identified concerns over consistency of supervision of the accountancy sector, and the levels of compliance among regulated professionals, as well as the potential for individuals to operate without supervision.
The NRA identified a number of areas where the existing regime needs to be strengthened and will publish an action plan shortly detailing how it plans to address the issues. Areas identified as problematic include:
understanding of certain types of money laundering, and particularly in relation to ‘high-end’ money laundering, where the proceeds are often held in bank accounts, real estate or other investments, rather than cash;
consistency of the UK’s supervisory regime, and specifically the understanding and application of a risk-based approach to supervision; and
priority given to combating money laundering by law enforcement agencies and the effectiveness of their response.
The government plans to publish an anti-money laundering action plan, setting out how the government will work with supervisors and the private sector to address the risks identified in the NRA. One of the main priorities in the action plan will be to plug intelligence gaps, particularly those associated with ‘high end’ money laundering through the financial and professional services sectors.
Current regulation covers accountancy and professional services firms under the Money Laundering Regulations 2007 (‘the regulations’) which place requirements on accountancy service providers (ASPs), including auditors, insolvency practitioners, external accountants and tax advisers, and reflects the requirements of the Third EU Money Laundering Directive.
The UK national risk assessment of money laundering and terrorist financing report is available here