What I didn’t say at Accountex

I had the pleasure of speaking at Accountex Manchester 2023 last month. I spoke pretty much off the cuff – with only a handful of slides. After my talk I remembered some things which I had thought would be worth mentioning but which I had not got around to saying. So this is my opportunity to get them said.

Electronic identity checks

Should accountancy firms be using electronic ID checks – of one sort or another – on all their clients? I would say, ‘YES‘.

In my view it is simply not realistic to suggest that a firm manually checks government lists of PEPs or sanctioned persons and I don’t think it is satisfactory just to say, ‘I know my clients and none of them are PEPs or sanctioned persons’. So I do advocate electronic ID checks for all clients.

There is quite a debate about whether, if an electronic check has been conducted and passed, it is necessary in addition to see identity and proof of address documents such as passports and driving licences. My advice would be to check the requirements of your AML supervisory body, as different supervisory bodies have different views on this.

AML Software

Is AML software worth considering? Again I would say, ‘YES‘. But this very much depends upon what other software your firm already uses. AML software can make onboarding new clients much easier and can help to ensure consistency and completeness of your CDD and AML risk assessments across all your clients.

But life will be a lot easier if your AML software works with other software in use in your firm – either because it is an additional module from your existing software supplier or because it can communicate with your existing software and exchange information with it.

Do we need to ID ALL directors of client companies?

Again this is a hot topic. Obviously you will carry out CDD on those directors of your client companies who are personal tax clients of the firm, and on those who are ‘beneficial owners’ of client companies (for example because they own more than 25% of the shares in the client company). But what if there is a director who is, say, a 10% shareholder and not personally a client of the firm?

The MLR 2017 say that you “must take reasonable measures to determine and verify … the full names of the board of directors (or if there is no board, the members of the equivalent management body) and the senior persons responsible for the operations of the body corporate”. But can you do that by simply asking your client for the full names of directors and confirming that by a search at Companies House?

The CCAB AML Guidance does not require identity documents to be obtained from directors of client companies who are neither beneficial owners of the client company nor personally clients of the firm. If in doubt I would recommend you contact your AML supervisory body and seek their view.

I hope these comments are useful. If you think that you may not have sufficient documentation to satisfy your AML supervisor to a satisfactory standard, or would simply like to discuss your firm’s AML compliance, then please contact us now.

David Winch MLRO support services ltd