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IPA backs CCAB on money laundering as 26 more countries now ‘high risk’

IPA backs CCAB on money laundering as 26 more countries now ‘high risk’

03 January 2024

The IPA has thrown its weight behind the Consultative Committee of Accountancy Bodies (CCAB) guidelines on AML and says that it has seen improvements recently in IPs’ awareness and reporting of money laundering risks. 

The CCAB’s approach was criticised in Recovery magazine by Mark Darby, compliance manager at Evelyn Partners, who said that the risks identified by the CCAB on AML, while applicable to accounting and consulting, were “generally irrelevant” for the insolvency profession.

Criticising the CCAB guidance that refers to “a business relationship between the IP and the debtor” Darby said the CCAB guidance “demonstrates a worrying misunderstanding of what insolvency is about”. 

He added: “There is no business relationship between the IP and the debtor. We perform a statutory function on the debtor with oversight from the court and the creditors’ committee, where formed and, if not, from the creditors as well as our regulators.”

But, supporting the CCAB’s approach, David Holland, chief inspector at the IPA, said: “The CCAB AML guidance and supplementary insolvency guidance remain as crucial guides for IPs to follow.”

Holland compared AML risk to those faced by regular road users: “When individuals commute to the office, there are well-known and accepted risks associated with driving, such as traffic accidents, road conditions and adherence to traffic laws. Most individuals are aware of these risks and take measures to mitigate them.” 

“In contrast, the risks associated with AML may not be as immediately apparent to IPs. The comparison lies in the need for IPs to be equally aware of the potential risks in their professional domain and especially when working in different sectors. Just as individuals adopt safe practices while driving to minimise the risks on the road, IPs must adopt robust AML measures to minimise the risks associated with financial crimes and money laundering.”

The IPA, which acts as AML supervisor for around half of the IP population, says it is seeing “consistent improvement” in AML awareness and reporting, but there are still some “simple failings” that can be addressed.  

Holland said firms need to:

• Update firm-wide risk assessments regularly. Since 1 September 2022, Regulation 18A requires risks of proliferation financing to be included. 

• IPs should also undertake the required level of customer due diligence prior to appointment and do not accept funds until the assessment has been completed. “Verifying identity is a first step but it is understanding risks which is the key part of the due diligence process. It is important to note that fintech and online verification does not replace the need to understand risks and should not replace common sense. It is important to document that IPs have researched the appointment online, companies house, websites and social media. These are all simple checks.” Training remains an important requirement to support efficient compliance, he said. 

• SAR reports should be completed as soon as there is a suspicion via the National Crime Agency’s new reporting portal and updated if more information becomes available.

The CCAB has also defended its own position on AML. Writing in Recovery magazine, Angela Foyle, chair of the CCAB’s crime panel said: “AML compliance is not an optional extra; an IP is obliged to comply with AML requirements, and it is an important part of an IP’s work.”

She added: “At the CCAB, we issued guidance on AML procedures for IPs because we knew it was vitally important that practitioners get this right. This guidance is not arbitrary and has not materialised from thin air; it is based on laws and regulations designed to prevent money laundering and counter terrorism and proliferation financing.”

The IPA’s comments come as 26 new countries were added in December to the Treasury’s list of third countries deemed to be high-risk, including Bulgaria and South Africa.

The full list of countries added to schedule 32ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 are: Barbados, Bulgaria, Burkina Faso, Cameroon, Croatia, DPRK, Democratic Republic of the Congo, Gibraltar, Haiti, Iran, Jamaica, Mali, Mozambique, Myanmar, Nigeria, Philippines, Senegal, South Africa, South Sudan, Syria, Tanzania, Turkey, Uganda, United Arab Emirates, Vietnam and Yemen.

Holland said: “IPs have to be aware of the changes and able to demonstrate they understand the potential impact of South Africa and Bulgaria being added to the list.” 

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