According to the UK’s Economic Crime plan 2019-22, the scale of money laundering is vast. The National Crime Agency (NCA)’s National Strategic Assessment 2019 estimates that serious and organised crime costs the UK economy at least £37billion a year and that there are 4,542 known organised crime groups operating in the UK.
IFA members should be aware of this threat and comply with anti-money legislation and guidance to minimise the risk that they and their business will be used to launder the proceeds of crime.
What is money laundering?
The definition of money laundering is broad. Money laundering is a process whereby criminals:
- retain, disguise and conceal the proceeds of their crimes;
- raise, consolidate or retain funds for use in financing terrorism.
In UK law money laundering is defined in the Proceeds of Crimes Act 2002 (POCA) and includes all forms of handling or possessing criminal property, including possessing the proceeds of one's own crime, and facilitating any handling or possession of criminal property.
Criminal property (defined in POCA) constitutes or represents a person's benefit from criminal conduct where the alleged offender knows or suspects that the property in question represents such a benefit. Criminal property may take any form, including money or money's worth, securities, tangible property and intangible property.
Money laundering can be carried out in any part of the world and can range from a single act involving one person to complex set ups involving various individuals. There are no materiality or de-minis exceptions in relation to money laundering. Examples of money laundering offences include tax evasion, theft, fraud, bribery, corruption, smuggling, modern slavery, human trafficking, drug trafficking and illegal arms sales.
What are my obligations?
The Money Laundering Regulations 2017 and the Money Laundering Regulations 2019 applies to all individuals and businesses that provide accountancy services, trust and company services or related services such as tax advice, audit or insolvency by way of business. This includes IFA members engaged in public practice.
Further guidance on what constitutes accountancy services can be found in Anti-Money Laundering Guidance for the Accountancy Sector and in Appendix 1 of the IFA Public Practice regulations Please note that Anti-Money Laundering Guidance for the Accountancy Sector is currently being revised for the Money Laundering Regulations 2019, which amend the existing Money Laundering Regulations 2017, and came into force on 10 January 2020.
IFA members who are covered by the regulations will have to implement policies, procedures and controls to prevent money laundering and are required to be supervised for compliance with the Money Laundering Regulations 2017 and the Money Laundering Regulations 2019
Some IFA members who are not in practice may not consider themselves to be in scope of the Money Laundering Regulations. However, anyone whose business provides any of the following services needs to consider carefully whether the regulations apply:
- company formation services;
- company correspondence and registered office services;
- company secretarial or administration;
- acting or providing someone to act as directors, trustees or in similar roles;
- trust advisory services, formation and administration; and
- interim managers who provide accounting services "under a contract for services" rather than as employees.
IFA members who are sub-contractors to accountancy firms may not to need to register for AML supervision if:
- they don't contract with the end client;
- they are included in all the accountancy firms' anti-money laundering provisions (including reporting and training); and
- this "arrangement" is evidenced by both businesses, most generally in their contractual terms.
If sub-contractors supplement a practice by providing services to their own clients, they will need to register for money laundering supervision as an accountancy services provider.
UK law and guidance
Given the nature of their role and services they provide, IFA members might be in a position to facilitate any of the above money laundering offences and should therefore be familiar with the law and guidance in this area, particularly:
- Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
- The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLR 2019)
- Anti-Money Laundering Guidance for the Accountancy Sector.
- Supplementary anti money laundering guidance for tax practitioners.
To help IFA members meet their obligations under the MLR 2017, in addition to guidance contained in the website, we have:
- developed an Anti-Money Laundering checklist. This checklist covers policies, controls and procedures, awareness and training, record keeping, firm’s risk assessment of money laundering or terrorist financing risks, client due diligence (CDD), reporting, supervision and monitoring requirements under the regulations; and
- provided an online Anti-Money Laundering Compliance software for free to our supervised firms.
Please note that both the Anti-Money Laundering checklist and the Anti-Money Laundering Compliance software is being updated for the changes resulting from the MLR 2019.
Failure to comply with the regulations
Failure to meet legal and regulatory obligations could have serious consequences. It is a criminal offence under the UK and Ireland regimes to fail to comply with your AML/CTF obligations. In addition, failure to comply with regulations will lead to disciplinary action by the IFA.
While firms will be required to be compliant with the new requirements from the MLR 2019 from 10 January 2020, in our capacity as an AML Supervisory Body the IFA will take into account the short lead-in time which firms have been given to implement all the new requirements in assessing the response to non-compliance identified. Each case will be assessed on its own merits.