Pathway To AML

By Nick Ashford, Partner, Withers Tsang.

Processes no one wanted and didn't know was needed....

AML, CDD, SAR, PTR, SOF, PEP are all acronyms that many of us at Withers Tsang were blissfully unaware of a few years ago. However, that all quickly changed when accountants were required to consider their AML obligations from 1 October 2018.

As a Chartered Accounting practice that has been in business over 20 years, Withers Tsang has built a positive reputation and vast range of clients spanning almost all industries and many countries. Currently we have a team of around 25 accountants and 4 partners that work with more than 2,500 clients. Clients that we have met, developed relationships and mutual trust.

Given the relationships we already had with our clients, I can’t say the imposition of AML compliance was looked upon favourably, in fact we had many “woe is me” questions before even considering the process…

  • Why do we need to do this, our clients are not criminals?

  • Why should we treat everyone that we engage like they are guilty of something?

  • How can we report on our clients without their knowledge, surely it is a breach of our ethics?

  • How can we ensure we do not provide captured activities and therefore be exempt from AML compliance?

  • Surely all of us “good” accountants will comply, but those accountants’ complicit with criminals won’t even bother, so what’s the point?

And that is where our AML journey, like most, start. Asking Why?

Why do we need to participate in AML, the moral argument instead of the legal?

AML in truth is very difficult for professionals to grasp. The protection of our client’s privacy and giving them confidence that their information and conversations are legally privileged is at the foundation of a professionals conduct.

Gathering of AML information and the requirement to report on suspicious activity is therefore against the very core of this ethical principle. Even after this principle had to be, and was addressed by professional bodies by allowing AML reporting, there still needed to be a personal justification of why we would breach this trust.

For us that justification came in the form of cold hard facts. At the time of us reckoning with AML we were made aware that:

  • At a minimum, globally around US$800 billion to US$2 trillion of money is laundered on an annual basis.

  • Money laundering is commonly linked to those involved in the trafficking of drugs, guns, and people, including children and child pornography.

  • It is quite common for money to be laundered through trustworthy frontmen who assist in the purchase of large assets or businesses.

Understanding these 3 key facts gave us a better understanding and a sense of why lawyers, accountants and real estate agents needed to be part of AML. It enabled us to understand the scale of the activity, the horrific use of laundered money, and how we could be inadvertently part of the criminal process.

After acceptance comes understanding…

Having a sense of moral duty, and grasping the inevitable reality that AML is not going away allowed us to move on to understanding the procedural requirements of AML compliance.

This came in 4 parts:

1. Finding the right people to lead and follow through with the AML implementation.

In our case we needed to show that these procedures were coming from the top. Therefore, it was one of the partners that led the implementation with one of our key staff members, being the compliance officer, our AML gatekeeper.

2. Risk Assessment

Understanding areas of our business that could inadvertently be part of a money laundering activity was both a logical step and a requirement. Thankfully, the whole accounting industry was going through this, and we were fortunate enough to work with industry experts that developed key areas of risk for an accounting firm to be aware of. The key areas of risk we looked at were:

  • Nature, size and complexity of our practice