AML And Gut Instinct

Nicola Hankinson, National Technical Manager, Bakertilly Staples Rodway


You’ve all heard the saying “”go with your gut”. When it comes to AML this saying sums up the call to action quite nicely. Given the risk-based nature of the AML/CFT in New Zealand, a number of key judgements and decisions are required to be made in determining how far we go in assessing the identity and credibility of our clients through the documentation they provide and their interactions with us. These judgements and decisions include:

  • Reviewing the ML/FT risk of a potential new client or customer;

  • Evaluating the ‘suspiciousness’ of a proposed transaction based on our understanding of the client and our experience of what makes good business sense;

  • Determining what is considered acceptable as support of source of wealth or source of funds;

  • Determining what is acceptable as alternative proof of identity and address verification, for those clients that don’t pass through the standard electronic identity verification processes or for some reason don’t have a valid passport or drivers licences (the reality is not everyone travels, particularly in the COVID-era, and not everyone drives).

When training our staff, we encourage them to investigate information that doesn’t quite “stack up”, to dig a bit deeper and to ask a few more questions. In the audit profession, the term “professional scepticism” is used. Professional scepticism is defined in the international auditing standards as:


“An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence .”


The concept of professional scepticism could apply equally well in the AML world.


One of my old bosses used to refer to professional scepticism as “engaging your brain” – not just going through the processes, ticking off the steps in the Compliance Programme or client onboarding form for example, but engaging your brain and thinking about what you are doing and why you are doing it. At times this might involve putting yourself in your client’s shoes or the shoes of those attempting to open an account, incorporate a company, put funds in your trust account or some other activity which is designated as in-scope of the AML/CFT Act.


Think about why they are trying to do what they are doing and maybe play devil’s advocate and think about what they could be attempting to conceal. In AML terminology we refer to this as looking for the “red flags”, are there any indicators that things are not quite right, that we should investigate a bit further to understand the true nature of the transaction, the true source of wealth or the ultimate beneficial owners.


While we might all have very well-written AML Risk Assessments and Compliance Programmes, ultimately the success of the AML regime is based on our ability to exercise our professional scepticism, to use our gut instinct and to know when to keep going, to keep asking questions. Christiaan Barnard, Detective Inspector of the FIU, came up with a catch

phrase which was often quoted in the monthly Suspicious Activity Reports we have come to know and love:


"know the risk, ask the questions, and report your suspicions to the #nzfiu"


It actually sounds quite easy when you put it like that. Keep an eye out for those fishy transactions, the ones that don’t make sense and don’t turn a blind eye. Back yourself, and your intuition, and work with your Compliance Officer to investigate the situation further.


Perhaps over the Christmas break take the opportunity to work on honing your investigative skills and developing your gut instinct with your family and friends. This will be sure to spice up the summer BBQ’s and get you ready for action in the New Year.


Nicola Hankinson, Bakertilly Staples Rodway
Nicola Hankinson

Find out more about AML Compliance from an accountancy perspective with Marion Garlick in 'Creating an AML compliance programme: an accountants experience'.




 
 

Source

ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in

Accordance with International Standards on Auditing