Currently guidance is provided in Practice Note 12: Money Laundering: Guidance for Auditors on UK legislation, which was last updated in September 2010.

The regulator said the existing material now needs to be revised to take account of new legislation passed by the government to transpose the 4th EU anti money laundering directive into UK Law. The new regulations, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017.

The FRC says it intends to change the format of the guidance provided to auditors, by adding it to ISA (UK) 250 rather than having a stand-alone practice note, with the aim of making all relevant material to support auditors available in one place.

The regulator points out that the latest revisions to ISA (UK) 250 includes amendments which specifically refer to money laundering, terrorist financing and proceeds of crime in the categories of laws and regulations which may have an effect on the financial statements. As a result, the FRC considered it beneficial to auditors to explicitly link, by including as part of the standard the UK specific legislative and regulatory requirements.

The FRC stresses that the main areas of change to existing practice note 12 will affect statutory auditors carrying out the audit of sets of financial statements arising from the Money Laundering, Terrorist Financing and Transfer of Funds (information of the Payer) Regulations 2017.

It also points out that requirements of money laundering legislation now apply to those carrying out local public audit under the Local Audit and Accountability Act 2014, in the same was as those carrying out other statutory audit work, or work for a national audit agency.

In addition, the updated material reflects the National Crime Authority’s (NCA’s) role in UK anti-money laundering, terrorist financing and proceeds of crime related matters, and links to revised material issued by the UK Financial Intelligence Unit, which is situated within the NCA.

A number of sections have been deleted as they are no longer required, or are superseded by other linked material, which has resulted in a significant shortening of the material from a 34 page practice note to a 12 page appendix to a standard. The FRC says the integration of material into the test of the standards themselves will avoid duplication of material contained in other relevant auditing standards.

The consultation closes on 8 September 2017.

FRC Consultation Paper and Impact Assessment: Money Laundering Guidance is here

Report by Pat Sweet