In its latest episode, the BBC program ‘Panorama’ alleges accountancy firm EY has covered up transactions which involved a crime gang laundering British drug money.
The investigation implies the Big Four firm failed in reporting suspicious activity led by the gold refinery Kaloti in Dubai.
The crime gang was convicted in 2017, but its money laundering approach has just been revealed.
The story started in Britain, in which a drug dealing boss received hundreds of thousands of pounds in cash that needed to be laundered.
The drug money was then collected in Paris and later transported to Belgium where it was exchanged for gold. The gold finally reached Dubai, where it was sold back into cash and transferred to bank accounts across the world- making the money untraceable.
No report of suspicious activity
Renade International, owned by a member of the gang, was found to have sold $146m (£114m) of gold to Kaloti in 2012. A year later, EY conducted a review of the gold refinery’s compliance with rules introduced to avoid money laundering.
According to the BBC despite auditors finding that Kaloti had paid out a colossal amount of cash back in 2012, EY did not report any activity it deemed suspicious.
Above all, BBC investigation suggest that the Big Four firm helped cover up the criminal activity, where the gold bars exported to Dubai had been coated silver.
Stephen Baker, Partner at Baker & Partners, commented: “It is to be recalled that even – or rather particularly – the large international brand names, of which EY is part, have duties which are to be scrupulously performed.
“No one is so big as to be exempt from binding duties in the vital fight against the flow of bad money; no one is so big as to be exempt from scrutiny and the need to provide proper explanations when things apparently go wrong.”
He added: “The Panorama piece also gives rise to this thought. It is easy to suppose that, with all the training, precept and example there has been in the fight against money laundering for many years now, the old days of egregious sinister schemes are over. Panorama has usefully confirmed that this may be very far from the truth.”
Flag it Up campaign
BBC’s ‘Panorama’ accusing EY of audit cover-up comes at a time where HMRC has launched its new campaign Flag it Up, aiming at tackling money laundering in the UK.
To promote the reporting of suspicious activity, the British government is currently working with the accountancy, legal and property sectors. As part of its activities, HMRC is stressing the consequences for professionals involved in money laundering, which could lead them into losing their license, receiving a fine, or facing criminal prosecution.
The Flag it Up campaign reveals that working professionals in the accountancy industry, for instance, can be particularly targeted by money launderers due to their expertise and services in the sector, giving a ‘cloak of legitimacy to illicit cash’.
Under the Proceeds of Crime Act, accountants have the legal duty of reporting suspicious activities such as money laundering to the police, meaning they embody a crucial role in protecting the UK’s economy and society.
Baker concluded: “Those working in professional and advisory services must remember that an institution’s culture can result in governance failures and these, in turn, can lead to accessory liability to a client’s wrongdoing. It is vital that organisations and their personnel are robust enough to maintain independence and apply the necessary professional scrutiny, even when under pressure from clients. The law makes it clear that there is an obligation to report suspicious financial activity such as money laundering.”
Further anti-money laundering resources and guidance for accountancy professionals can be found on the Anti-Money Laundering Guidance for the Accountancy Sector page designed for entities providing audit, accountancy, tax advisory, insolvency or related services such as trust and company services.