AAG Response to the publication of the UK’s national risk assessment of money laundering and terrorist financing
The accountancy profession strongly supports the UK’s drive to combat money laundering and terrorist financing. We also recognise the considerable value to be gained from identifying and understanding the associated risks that impact on our business activities and on society as a whole. We are therefore committed to support and contribute to the development of the National Risk Assessment (NRA) to achieve this.
However, we have been unable to gain a clear understanding of the scoring system underpinning the risk ratings and we have not had the opportunity to contribute or have access to the specific assessment relating to our sector ratings. It is therefore unclear how the report has concluded that accountancy service providers are viewed as high risk and surprising that all ‘accountants’ have been combined in one grouping – whether registered, regulated or not.
The term “accountant” has never been a protected term and so it is open to individuals who are not professionally qualified, or subject to professional standards or any form of quality monitoring, to deliver accountancy services to the public. While such accountants are supervised by HMRC for anti money laundering compliance, they are not required to conform to any ethical, reporting or general practice standards. It is imperative – to ensure our efforts and resources are properly targeted and deployed efficiently - to distinguish between those who are professionally qualified and regulated by a professional body, and those who are not.
The NRA makes this distinction clear for the gambling sector but not for the accountancy sector.
The accountancy sector is diverse; encompassing a range of services including bookkeeping audit, taxation services and insolvency. These services are delivered to a wide range of clients, from individuals and large corporate bodies to public sector entities. As the NRA acknowledges, the majority of accountants are employed within industry, commerce and the public sector, which are not subject to the rigorous controls put in place for practising accountants (the ‘accountancy service providers’)under the Money Laundering Regulations 2007.
The role of the professional body supervisors is critical, as each body takes care to understand its supervised population, the risks they pose and the risks they face. Inevitably, adopting the sensible and proportionate ‘risk-based approach’ required by the anti-money laundering regime, each body has designed its policies and procedures to reflect specific demographics of their membership, the services they provide, the nature of their clients and the geographic reach of member firms. All of this varies greatly across the sector. What may be seen by some as inconsistency of regulatory approach between professional bodies invariably reflects a consistent response to very different risk profiles.
The NRA acknowledges shortcomings in understanding of and intelligence relating to the accountancy sector, which contributed to the overall risk rating. And while we question the rationale for this approach, we remain committed to collaborating with law enforcement agencies the National Crime Agency, HM Treasury and the Home Office to build comprehensive contextual intelligence to better inform future iterations of the NRA, whilst continuing to develop our own understanding and supervisory response to the areas where the risk of money laundering or terrorist financing are greatest.
Notes for editors:
- The Accountants Affinity Group (AAG) is a sub committee of the UK Anti Money Laundering Supervisors Forum. The accountancy professional body supervisors listed in Schedule 3 of the Money Laundering Regulations 2007 (as amended) are represented in the group. This consists of the Association of Accounting Technicians, Association of Chartered Certified Accountants, Association of International Accountants, Association of Taxation Technicians, Chartered Institute of Management Accountants, Chartered Institute of Taxation, Insolvency Practitioners Association, Institute of Certified Bookkeepers, Institute of Chartered Accountants in England and Wales, Institute of Chartered Accountants in Ireland, Institute of Chartered Accountants of Scotland, Institute of Financial Accountants, International Association of Bookkeepers.
- HMRC is also represented at the table, not subscribed to this response.
- The AAG is a forum in which the professional bodies work collaboratively to develop accountancy sector supervisory policy to promote consistency in standards and best practice. It is an information sharing forum.