Advisers: Keep abreast of tech to avoid money laundering pain

COMBATTING MONEY LAUNDERING and terrorist financing was already on the global accounting standards agenda for at least a decade before the tragic events of 11 September 2001.

However the events of that day, and their long-term consequences, have significantly increased the profile of criminal financing.

At that time, the height of technological sophistication was the introduction of wireless internet, a feature we all take for granted now.

Over the course of the past few years we have seen a magnitude of technological developments, from the smart phone with the support of Siri and Cortana, to the introduction of mobile phone enabled payments, through to the virtual currency of Bitcoin and beyond. All of these new developments have increased the challenges that accountants now face.

With the rise of terrorist groups such as ISIS and their supporters, still rampaging through Iraq and Syria in recent weeks, in addition to organised crime groups, who are always looking for new ways to fund their activities, accountants need to be vigilant to any unusual activities from their clients which could see them compromised. Criminal groups are always looking for new ways to obscure illegal origins of funds, and any accountant could find themselves unwittingly becoming involved.

Don’t fall foul of dodgy clients

A key vulnerability that offenders can exploit in order to pursue their own criminal aims successfully is ignorance, or a lack of understanding of technology. In the context of the work of accountants, this can mean clients using legitimate services to pursue illegitimate means, resulting in you cleaning up dirty money. Crucially, you may be none the wiser to the fact that your services are being used in this way.

Accountants who fall foul of unscrupulous clients could find themselves charged with offences under either the Proceeds of Crime Act 2002, or the Money Laundering Regulations 2007, so it is vital that risk sensitive policies and procedures are put in place by accountants in practice.

The key risk you have relates to who you are dealing with. Do you really know your clients and their businesses? Accountants are now required to be alert to the prospect of terrorist financing, which is not so easy to spot. This is where you have to defy all the life lessons that have been drilled into you about not being nosey, and start asking those probing questions.

The key things that criminals hate the most are being questioned about the source of their funds, or why they want to undertake certain actions. Do not think of yourself as being nosey, but think of its true and intended purpose instead. You are simply demonstrating the professional scepticism which sets you aside from unqualified counterparts.
Question the source of funds

Keep abreast of tech developments

It is important that you keep abreast of what the new technological developments are and consider how these could be used for Machiavellian purposes. As recently as late last year, it was suggested by Brooke Satti, a leading specialist in financial crimes intelligence, that “cryptocurrencies” such as Bitcoin, are the money making mechanism of choice for ISIS. The terrorist organisation has increasingly come up against the robust barriers put in place by global commitment to anti money laundering, and counter terrorist financing.

Here is something to ask yourself: would you know how to trace transactions back through to Bitcoin? And if you did, how would you satisfy yourself of the legitimacy of the funds? While accountants are not expected to become technological experts, there is an argument for having a strong knowledge base and this is considered crucial for Continuous Professional Development (CPD).

Some people might willingly choose to be criminals. The law however, is increasingly holding those referred to as “professional enablers” (including accountants), who through ignorance or naivety engage in criminality and terrorism, equally as responsible as the lawbreakers. And for those who are at risk of falling into the latter category, I would strongly advise you to take your obligations under anti-money laundering legislation, and professional ethics seriously.

To quote poet and attorney Max Ehrmann: “Exercise caution in your business affairs, for the world is full of trickery.”

Tania Hayes is head of conduct and compliance at AAT

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