Anti-money laundering rules for accountants revised
The Treasury has approved the long-awaited anti-money laundering guidance for accountants and tax advisers and an extensive document has been released including details on how to determine whether a politically exposed person (PEP) is a high or low risk
8 Mar 2018
The guidance has been updated for the 2017 anti-money laundering regulations and is approved by Treasury. It has also been adopted by the UK accountancy anti-money laundering supervisory bodies.
It has been prepared jointly by the CCAB bodies: ICAEW, ACCA, ICAS, CAI, and the Chartered Institute of Public Finance and Accountancy (CIPFA). The guidance defines money laundering, outlines responsibility and oversight requirements and a risk based approach. It also covers customer due diligence, suspicious activity reporting, record keeping, and training and awareness.
One difference from the original draft guidance is the section on politically exposed persons (PEPs). The 2017 regulations specify that PEPs (as well as certain family members and known close associates) must undergo enhanced due diligence.
The guidance points out that businesses must treat PEPs on a case-by-case basis, and apply enhanced due diligence on the basis of their assessment of the particular risk associated with any individual PEPs. PEPs entrusted with prominent public functions by countries with characteristics such as low levels of corruption; strong state institutions; and credible anti-money laundering defences are likely to pose less of a risk than PEPs from higher-risk countries.
CCAB points out that an individual identified as a PEP solely because of their public function in the UK must still be treated as a PEP. However if the business is not aware of any factors that would place the individual in a higher risk category, the individual may be categorised as a low risk PEP.
Regulation 18 of the 2017 regulations and the risk factors guidance produced by the European Supervisory Authorities set out factors that might point to potential higher risk. Additional factors that might point to potential higher risk could include known involvement in publicised scandals eg, regarding expenses; undeclared business interests; or the acceptance of inducements to influence policy. In higher-risk situations, businesses should apply more stringent enhanced due diligence measures.
In lower-risk situations a business should apply less onerous enhanced due diligence requirements (such as, for example, making fewer enquiries of a PEP’s family members or known close associates; and taking less intrusive and less exhaustive steps to establish the sources of wealth/funds of PEPs).
Businesses must treat individuals as PEPs for at least 12 months after they cease to hold a prominent public function. This requirement does not apply to family members or known close associates. Family members and known close associates of PEPs should be treated as ordinary clients (and subject only to customer due diligence obligations) from the point that the PEP ceases to discharge a prominent public function. Businesses should only apply enhanced due diligence measures to PEPs for more than 12 months after they have ceased to hold a prominent public function when the business has determined that they present a higher risk.
To establish whether someone is a family member or known close associate of a PEP, businesses are expected to refer only to information that is either in the public domain or already in their possession.
Andrew Burns, CCAB chairman said: ‘The approval of the guidance by Treasury is very welcome. As key gatekeepers for the financial system, accountants have a vital role to play in preventing their services from being used for criminal purposes including the funding of terrorism. The guidance is an important framework to ensure accountants remain vigilant, work with integrity, and uphold the law.’
Report by Pat Sweet