What are the risks of Money Laundering?

According to a report from Accountancy Age the risk of Money Laundering has significantly increased recently.

Money laundering strategies are constantly evolving, with The National Risk Assessment (NRA) of Money Laundering and Terrorist Financing warning that the risk that accountancy service providers could be used to facilitate money laundering is considered high. The Institute of Financial Accountants (IFA) is urging accounting firms to employ vigilance now more than ever as it encourages regular review of their client and firm-wide risk assessments.

Multi-billion pound problem

The National Crime Agency (NCA) believe it is likely that money laundering is in the hundreds of billions of pounds every year, with the expanding threat brought by global underground banking only compounding the problem.

Furlough fraud is another emerging risk factor, exacerbated by the pandemic. The coronavirus outbreak has also led to an increase in the delivery of services via remote methods (e.g. cloud accounting platforms), potentially placing practices at higher risk.

Accountancy services remain an attractive target for criminals, used to help their funds gain legitimacy and respectability, as implied by accountants’ professionally qualified status. Some services provided by accountants are at higher risk than others. The NRA states that the risk is highest when accountants do not fully understand the money laundering threats and do not implement appropriate risk-based controls, particularly where accountants fail to register with a supervisor. The AASG risk outlook provides further guidance and red flag indicators on each of these risk areas it considers are relevant to the accountancy sector.

Services that are identified as higher risk in the AASG risk outlook include company formation and termination, mainstream accounting, and payroll. International money laundering risks should also be considered by accountants as part of their firm-wide risk assessment, and enhanced due diligence procedures are needed for clients that are established in high-risk countries to mitigate the risks to the firm.