1 Outline

1. Payback Conference for the Regulated SectorAML Supervision for accountants, tax advisors and book-keepers

2. 1 Outline • The AML requirements for individuals and firms • Guidance and other resources • The regulated sector – who is in and who is out? • The role of the supervisory bodies • UK’s risk based approach to AML monitoring • UK’s measured response to non-compliance • Conclusion

3. 2 Requirements for Individuals and Firms • Proceeds of Crime Act 2002 (as amended) • Terrorism Act 2000 (as amended) Define the main money laundering offences, the requirements to report suspicions of money laundering, and the tipping off offences. • Money Laundering Regulations 2007 Set out systems and control requirements for firms within the regulated sector.

4. 3 The UK Framework – a summary Requirements embedded in law and regulation are brief and principles based Industry Guidance fills out the requirements – in the case of accountants the CCAB Guidance The Courts are required to consider Treasury approved Guidance in their interpretation of the law – so they essentially become part of law.

5. 4 The UK Framework – a summary The “CCAB Guidance” is Treasury approved Guidance, that has been adopted by all the supervisors in the accountancy sector - All accountants and related service providers will be judged according to their compliance with the CCAB Guidance, by their supervisory bodies or the Courts

6. 5 Sources of Guidance The CCAB Guidance – an essential source http://www.ccab.org.uk/documents.php SOCA web site http://www.soca.gov.uk/ The ICAEW money laundering site http://www.icaew.com/moneylaundering Your own supervisory body

7. 6 The Regulated Sector effecting or carrying out long-term insurance contracts dealing in, managing, advising on, safeguarding or administering investments changing or transmitting money, or cheque cashing estate agency work operating a casino – onshore or web based engaged in insolvency practice tax advice or accountancy, by way of business legal services – banking, investment and property providing formation, operation or management of a company or trust, by way of business accepting cash payments of more than €15,000, for goods

8. 7 The Regulated Sector Accountancy services includes … any service provided under a contract for services (ie, not a contract of employment) which pertains to the recording, review, analysis, calculation or reporting of financial information (CCAB Guidance) This includes book-keepers, auditors, many interim managers and tax compliance work Tax advisors, insolvency practitioners and trust and company service providers are also included

9. 8 Requirements for the Regulated Sector • customer due diligence (CDD); • reporting (suspicions); • record keeping; • internal control; • risk assessment & management; • communication; • staff awareness, training & update to forestall/prevent money laundering & terrorist financing

10. 9 Requirements for the Regulated Sector • Register for supervision with HMRC, if not registered with one of the professional bodies listed in Schedule 3 of the Money Laundering Regulations

11. 10 Schedule 3 Professional Bodies • Association of Chartered Certified Accountants • Institute of Chartered Accountants in England and Wales • Institute of Chartered Accountants in Ireland • Institute of Chartered Accountants of Scotland • Association of Accounting Technicians • Association of International Accountants • Association of Taxation Technicians • Chartered Institute of Management Accountants • Chartered Institute of Public Finance and Accountancy • Chartered Institute of Taxation • Insolvency Practitioners Association • Institute of Certified Bookkeepers • Institute of Financial Accountants

12. 11 Duties of Supervisory Bodies • Required to: • Effectively monitor firms • Take necessary measures to secure their compliance • Report suspicions or knowledge of ML • Consistency of approach: • A risk based approach, subject to principles of better regulation • Coordinated through the AML Supervisory Forum, including the Accountants Affinity Group

13. 12 Risk based approach to ML supervision Providing an effective & proportionate regime: • Principles, not prescriptive/restrictive • Optimise resources by focus on highest risk of: • Incidence of ML activity • Non-compliance with regulations • Supervisory tools: • Authorisation: registration and gate-keeping • Supervision: information and review • Guidance & Communications: including training/help • Enforcement: sanctions for non-compliance

14. 13 Response to non-compliance • Where firms try to comply • Support • Help • Educate • Where firms are negligent • Consider penalties • Consider de-registration/refer to HMRC • Persistent/serious non-compliance • Penalise • Exclude (with publicity?)

15. 14 ICAEW’s approach to AML monitoring - 1 Q: How do we monitor our firms? • Annual returns • Cyclical visit programme & risk-based selection • Visit procedures focussed on process & control • Supportive ethos to PA; committee of peers • Training & information for our Reviewers • Guidance for members/firms; Helplines Proportionate, Realistic, Effective, Collaborative

16. 15 ICAEW’s approach to AML monitoring - 2 Q: What do we look for? • Compliance with MLR.07 & guidance • MLRO appointed & Training provided • Procedures properly documented including: • Customer Due Diligence - all clients, risk-based (PEPs, clients not seen, beneficiaries > 25%, retention) • Ongoing monitoring: clients & internal procedures • Retention of CDD records (5 years) • Principals understand responsibilities (9 offences)

17. 16 ICAEW’s approach to AML monitoring - 3 What do we look for? • Carousel fraud; x-border; mobile/hi-value goods • Major fluctuations in business; low margins; few staff • Business disproportionate to nature/size of business • Offshore: managers/owners/funds; suppliers/customers • Hi-risk countries – business connections • Firm operating as banker • Topical issues: Arms-dealing; Schooling; Medical

18. 17 ICAEW’s approach to AML monitoring - 4 What could we find? • Missing/inconsistent CDD (ongoing clients) & CPD • Carousel fraud; import/export; mobile/hi-value goods • Off-shore banking business • Highly geared grandmother • Trusty trustee • Mortgages and visas – made easy • Same old, same old…

19. 18 Questions