Combating money laundering

As referenced in part one of this series, the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 places specific obligations on accountants to combat money laundering and terrorist financing. This second article will address:

• policies, controls and procedures
• reporting suspicious transactions
• training

Policies and controls

The obligation of firms to adopt appropriate policies, controls and procedures is explicitly referred to in the 2018 act. Effective compliance for any firm must include the implementation of controls that increase the chances of detecting and preventing money laundering. To identify, assess, monitor and manage the risks, the policies, controls and procedures should be designed to suit the risk level; they must also be approved by senior management, and this approval must be evidenced.

All policies, controls and procedures should be reviewed regularly to assess any potential increase or decrease in risk. The frequency of the reviews should be proportionate to the size of the firm and the level of client/services risk. For example, it would be reasonable to assume that a sole practitioner would not require the same review frequency as a larger firm employing a number of staff.

Factors in determining the nature and extent of policies, controls and procedures include the size of the firm, the complexity and range of services, the geographical location of clients, any dealings with high-risk jurisdictions, and any dealings with businesses or transactions that are deemed high risk.

An anti-money laundering policy would be broken down into the following sections: introduction, roles and responsibilities, business risk assessment, customer due diligence (to include different types), politically exposed persons, beneficial ownership, reporting suspicious transactions, record keeping, and review.

The volume and complexity of procedures will be dependent on the size of the firm, the service provided and the assessed level of client risk. All procedures should contain details of the appropriate controls in place to combat the money laundering risks identified. Types of procedures that SMPs should have in place include:

• client due diligence, including enhanced client due diligence
• ongoing monitoring (regularly reviewing clients to assess for changes in risk)
• suspicious transaction identification and reporting
• record-keeping (maintaining appropriate records)

Suspicious transactions

A suspicious transaction is one that is inconsistent with the client’s known legitimate business or personal activities or with the normal business for the type of client. Accountants are legally obliged to report any actual or suspected instances of money laundering to the Financial Intelligence Unit (FIU) of An Garda Síochána and Revenue. The firm’s internal procedures should be followed when reporting suspicious transactions.

Examples of suspicious transactions include: invoice payment discrepancies, illegal dividend payments, invoices lacking commercial rationale, suspected price fixing, certain transactions related to offshore business activity, certain transactions involving unusual levels of funds, and unusual instructions from a client.

There is no minimum threshold for transactions, so firms need to be diligent in their approach to reporting; they should not view it as a betrayal of the client’s trust. Where a firm decides that a report is not to be forwarded to the FIU, the reason for this decision must be documented and maintained on file with the original report.

Certain information may be subject to legal privilege. It is important that consideration is given to whether the professional privilege reporting exemption applies; this should be assessed prior to submitting any reports to the FIU or Revenue. Such information is exempt from disclosure under the act.

Under the law, it is an offence for firms to make any disclosures to clients which would be likely to prejudice ongoing or future investigations. This rule on tipping off applies to any person, at any level, acting for or on behalf of the firm.

Training

To demonstrate compliance with the anti-money laundering legislation, firms must ensure that relevant staff are aware of the law and understand their responsibilities.

Training should not be limited to staff who deal directly with clients but should also include those involved in managing the firm’s finances and other relevant support staff. A lack of adequately trained staff could increase the risk of prosecution during an investigation.

The points below are an indication of the topics that should be covered in any anti-money laundering training programme, with the level of detail being commensurate with the role, level of responsibility of the relevant staff:

• money laundering/terrorist financing law – overview of the law and how it impacts the firm and the staff members
• risks – as identified in the firm’s business risk assessment
• red flags – recognising indications of money laundering
• reporting – obligations relating to suspicious transactions and reporting
• procedures – training in anti-money laundering procedures
• general – maintaining records and ongoing monitoring