Money laundering

Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activity, allowing them to maintain control over the proceeds and, ultimately, providing a legitimate cover for their sources of income. The term is widely defined to include: possessing, in any way dealing with, or concealing, the proceeds of any crime ('criminal property'). It also includes:

• an attempt or conspiracy or incitement to commit such an offence

• aiding, abetting, counselling or procuring the commission of such an offence

• an act which would constitute any of these offences if done in the UK.

'Criminal property'
This includes:

• proceeds of tax evasion

• a benefit obtained through bribery and corruption

• benefits obtained, or income received, through the operation of a criminal cartel

• benefits (ie saved costs) arising from a failure to comply with a regulatory requirement that is a criminal offence.

Tipping-off
The offence of tipping-off occurs when the MLRO (or an individual) makes a disclosure which is likely to prejudice an investigation. This does not prevent businesses and individuals discussing with clients, and advising on, issues regarding prevention of money laundering or other related matters, on a non-specific basis.

Fiscal offences
Tax-related offences are not in a special category. Tax evasion is a crime, the proceeds of which can be laundered in the same way as those from drug trafficking, terrorist activity, theft, etc. Offences may relate to direct or indirect tax. Tax evasion offences, which fall within the definition of money laundering include underdeclaring income and overclaiming expenses.

Professional duty of confidence
Accounting professionals will not be in breach of any professional duty of confidence if they report, in good faith, any money laundering knowledge or suspicions to the appropriate authority.

Statutory provisions give protection against criminal action for members in respect of their confidentiality requirements. This protection applies even if the suspicions later prove to be groundless, provided that the reports were originally made in good faith.

Client confidentiality override provisions are available when:

• there is knowledge or suspicion that a person has committed a money laundering offence

• a prohibited act will be or has been committed.

Disclosure without reasonable grounds will increase the risk of a business or an individual being sued for breach of confidentiality.

Record keeping
All client identification records, together with a full audit trail of all transactions, must be maintained. Records of transactions must be kept in a readily retrievable form for a period of at least five years, with controls to ensure that they are not inadvertently destroyed. Client verification records must be retained throughout the period of the relationship and for five years after termination of the relationship. ACCA's Rules of Professional Conduct 'Retention of books, files, working papers and other documents' also apply.

Client identification
The requirement to verify the identities of all clients is mandatory. Verification must be documented before any work is undertaken. Sufficient knowledge of a client must be maintained to be able to identify that which is unusual and/or suspicious. Members are required to obtain evidence of identity for all clients where:

• an ongoing business relationship is to be established

• the total value of any transactions is not known at the outset

• a one-off transaction or a series of transactions in excess of (the equivalent of) Euro 15,000 is to be undertaken.

Anti-money laundering programme
Basic elements:
The basic elements to be considered when designing an anti-money laundering programme include:

• dedicated resources

• written policies and procedures

• comprehensive coverage

• timely escalation and resolution of matters

• explicit management support

• sufficient training and education

• regular review/audit of the programme.

Dedicated resources
A person should be identified and charged with the responsibility for overseeing the entire anti-money laundering programme. The MLRO must be:

• competent and knowledgeable about money laundering

• empowered with full responsibility and authority to make and enforce policies and procedures.

Regular review/audit of the programme
A regular review of the programme should be undertaken to ensure that it is functioning as designed. Such a review could be performed by external or internal resources, and should be accompanied by a formal assessment or written report.