Many practitioners must be viewing the recent activities of the professional AML regulators with some apprehension. Are firms’ AML systems adequate, and what exactly are the downside risks if your AML documentation does not meet the required standards? We have copied in below an account by Richard Hattersley, and including comments by our director David Winch, published by the AccountingWEB, 24th April 2023, that describes the plight of one such “overwhelmed” sole practitioner:
Malcolm Bass, an ICAEW member since November 1982, was severely reprimanded and fined £14,700, along with being ordered to pay costs of £9,140, after failing to provide evidence to ICAEW to demonstrate his firm’s compliance with anti-money laundering (AML) procedures.
Bass admitted during his oral submission to the tribunal that his inaction was down to feeling “overwhelmed” by the issues raised and he got to the point where he couldn’t open any letters.
As reported in April’s disciplinary orders, the sole practitioner’s AML shortcomings were uncovered during a routine cyclical review monitoring visit in March 2011. The extent of the AML issues identified by the reviewer were not sufficient enough to refer to the practice assurance committee, so the case was closed based on the assurances from Bass.
However, suspicion was raised after Bass’s firm did not submit practice assurance annual returns and a QAD meeting was held in March 2019 about the sole practitioner’s lack of progress in addressing his firm’s AML procedures.
Failure to provide information
Bass followed up that meeting later that same month with the action he intended to take, including a firm-wide risk assessment within the following six weeks in addition to carrying out client due diligence reviews and keeping records of this.
The QAD, however, needed further assurance that Bass was upholding his record-keeping and AML processes, but the regulatory practice group case manager’s requests for information sent between July and September 2019 remained unanswered.
At this point, the case was escalated to the practice assurance committee in 2019 and then the professional conduct committee in 2020.
This is when Bass was confronted with seven complaints ranging from failure to provide the requested information to failure to provide evidence of this documented risk assessments and customer due diligence, and not providing annual returns for 2018, 2020 and 2021.
On the day of the tribunal, Bass did provide the outstanding annual returns and confirmation of his indemnity insurance.
When asked about his AML procedures and reasons for not providing the information about his due diligence, Bass said that he had become “overwhelmed” by the situation. He accepted he should have done more to address the issues but he kept putting it off.
Bass’s failure to provide information, respond to the QAD, provide AML evidence and provide annual returns equated to six complaints and each came with financial sanction.
Judging all the complaints in the round, the tribunal decided to severely reprimand Bass and issued a financial penalty of £21,000 which was reduced by 30% to £14,700 because he had made a full admission.
Combined with having to pay costs of £9,140, the total financial penalty and costs were £23,840. Bass will pay the sum in 12 instalments of £1,986.67 per calendar month. In addition, the ICAEW disciplinary committee also ordered Bass to undertake a QAD visit, at his cost, in 2023 and provide the information requested back in 2019.
A common theme
AML non-compliance has become a common theme in recent disciplinary reports. Last month ACCA expelled a member for lying about their AML policy after they falsely claimed their policy had been in existence longer than it actually had; while in December ACCA excluded an accountant after he failed to keep up with the AML procedures because he didn’t think the rules applied to his small business clients.
These exclusions come as the government has unveiled plans to toughen up AML supervision. This drive to make AML supervision more rigorous will likely cascade down to accountants as professional bodies feel more pressure to combat money laundering.
We can help
If your firm has received notice of an AML compliance visit, would like to ensure that its’ AML systems are up to scratch or respond to a negative report from their regulator, we can help. Take a look at the AML support services we offer.