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The War Against Money Laundering

11 Oct 2023

For any accountant, the biggest professional fear that they face is the prospect of being struck off. The worst thing about it, is that the primary reason for loss of license is one of the most preventable, the facilitation of money laundering. Stringent KYC measures practically eliminate the occurrence of money laundering and are one of the easiest measures to comprehensively implement.

FCA’s Powers of Criminal Prosecution

Money Laundering Regulations 2007 (MLR 2007) bestowed the FCA power to prosecute alleged money launderers, applying to financial institutions, legal professionals, and professionals within the financial sector. Individuals falling within these categories may be known as “relevant persons” within these regulations.

Relevant persons may be prosecuted for money laundering when each of the following requirements are not met…

  • The requirement to apply due diligence.
  • The requirement to conduct ongoing monitoring of a business relationship.
  • The requirement to carry out customer verification.
  • The requirement to carry out customer due diligence.
  • The requirement to carry out enhanced due diligence.
  • The requirement to keep records.
  • The requirement to maintain appropriate and risk-sensitive policies and procedures.
  • The requirement for employee training and awareness.

Often, those who infringe MLR 2007 are met with harsh financial penalties. However, in some more extreme examples, individuals may be struck off, and practises may lose their accounting licenses. In the worst cases, relevant persons may even be indicted with criminal charges should their infractions be serious enough.

NatWest and the FCA’s Crackdown on AML.

The indictment of NatWest after their guilty plea in December 2021 is a clear indication of the FCA’s newfound ardour to crack down on money laundering, where they fined the high-street bank £264.7 million for failing to monitor suspicious activity. In addition, they were instructed to pay a further £460,000 to cover any financial benefit, and legal costs of £4.6 million. So how were the regulations breached? Fowler Oldfield, a Bradford-based gold dealer was allowed to deposit £365 million at fifty branches over a five-year period, with at least £700,000 of this being transported in bin bags – as flagrant a violation of AML regulation as you’ll ever see. This marked the first instance of the FCA prosecuting a company for breaching Money Laundering Regulations, despite the rules being in the statute book since 2007.

Case Study: Hans Chung Han Hung

We can also consider the case of Hans Chung Han Hung, a 40-year veteran of the accounting industry prior to his exclusion from the ACCA. Hung was first contacted in August 2020 to set a date for a monitoring review to no avail, repeatedly attempting to reach him into September. While they managed to reach him through a colleague leading to a date and time being set, Hung disappeared once again after failing to provide requested documents.

By the end of September, the compliance officer finally received some documents. A telephone review was conducted on 2 October 2020, leading to a request for additional documents on the firm’s AML policy and procedures document. Hung’s template didn’t provide an assessment of the risks the firms faced, or any actions taken to mitigate those risks. The template was neither tailored to the firm, nor did it include details of the firm’s day-to-day processes. The processes that it did include were not even relevant to the firm! There was no nominated compliance officer for the firm listed, no details of topics covered in staff AML training, or details of any training whatsoever.

Despite Hung’s clean forty-year career in accounting, his lack of co-operation, coupled with his clear breaches of AML regulations led to his exclusion from the ACCA, and a fine of £6,000. This is an example of the highest sanctions being imposed on a sole practitioner, and an undeniable reminder of the importance of following AML procedures correctly to avoid falling afoul of your regulator.

What measures can you take to prevent this from happening?

While most accountants strive to stay on the correct side of compliance regulations, there is no doubt that this can be a tedious endeavour at times. Luckily, with the advent of cutting-edge technology, it is easier than ever to ensure that your practise is fulfilling its regulatory obligations. This can all be done from a simple app on your client’s smartphone, giving you real time results online in minutes, without any paperwork or hassle.

While there are other products of this category on the market, few are more comprehensive than Verify by Tiller. Our ‘Core Identity’ verification incorporates multi-layered ID verification checks with the latest technological innovations, so you can be sure that Verify by Tiller will meet all your KYC and AML requirements in a fast and frictionless manner.

Verify by Tiller’s ‘Core Identity’ check includes:

  • Real time remote identity verification
  • PEP and Sanctions
  • Biometric facial recognition
  • Active liveness detection
  • Geolocation
  • NFC chip scanner
  • Physical tamper checks

In addition to ‘Core Identity’, we provide comprehensive international and UK address verification, and will soon be launching adverse media checks, source of funds, and continuous monitoring for PEP and Sanctions.

With over 30 years of experience in capital markets, Verify’s comprehensive compliance framework ensures adherence to regulatory requirements, offering peace of mind to accountancy firms. They truly understand the intricacies of compliance and its role in the industry.