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Home / ... / Money Laundering - The Accountant's Reporting Dilemma

European efforts to frustrate criminals in benefiting from the proceeds of their own crimes have resulted in the implementation of two anti-money laundering Directives in EU member states. In the Republic of Ireland, regulations introduced last year brought accountants and auditors within the anti-money laundering provisions of the Criminal Justice Act, 1994 (as amended). But because the scope of the regulations remains unclear, some professional bodies have been slow to issue formal guidance for their members. Niall Walsh, FCA, is Chairman of a working party, set up by the Consultative Committee of Accountancy Bodies in Ireland (CCAB-I), to examine and advise on the anti-money laundering obligations of accountants. A Briefing Paper issued by his group to members of the CCAB-I constitutent bodies in August 2003 highlighted the potential expansive scope of the regulations and identified three key issues on which it felt clarity was needed as a matter of urgency: • the scope of the legislation; • the absence of any de minimis threshold; and • the 'tipping off' provisions. Mr Walsh explains: “At that stage (August 2003) there was a lot of uncertainty about the definition of money laundering and what the precise nature of the reporting responsibility would be. Those uncertainties were outlined in our Briefing Paper which we did not issue as formal ‘guidance’ because we wanted to avoid the risk of creating additional obligations or duties for accountants, auditors or tax advisors not envisaged by the legislation”. Since then the working party has been working hard to resolve the issues identified in their Briefing Paper. They have received opinions, from the Office of the Attorney General and from a Senior Counsel engaged by the CCAB-I, that support the ‘expansive’ definition of money laundering set out in the Briefing Paper. But, explains Mr Walsh, “We are aware of other conflicting legal opinions which obviously gives rise to more uncertainty, making it difficult for CCAB-I to move forward on issuing formal guidance”. “The definition of what comprises the offence of Money Laundering is significant. The offence of money laundering is defined in Section 31(1) of the Criminal Justice Act, 1994 but there is uncertainty about the interpretation of this section. and what our CCAB-I Committee is looking for is clarity and common interpretation. If the accountant does not understand what comprises Money Laundering under the Act then he or she will be unable to determine whether or not he or she has a suspicion that a Money Laundering offence has been committed, and therefore will be unable to determine whether or not he or she must make a report. As far as we know, guidance issued by other professional bodies ignores any attempt at explaining the scope of the legislation in spite of the Attorney General’s views having been placed before the Department of Finance sponsored Money Laundering Steering Committee (MLSC).” Aidan Lambe, Deputy Director in ICAI’s Professional Standards Department recently led a delegation to the Department of Finance in an effort to arrive at a common interpretation. He says: “It is only by achieving this that we can establish a level playing field for all the designated bodies. That is important if we are to ensure Chartered Accountants are not placed at a competitive disadvantage vis a vis lawyers and other professionals.” The Department of Finance has agreed to a request to table proposals aimed at achieving this at the next meeting of the MLSC.

‘Trivial’ offences Meanwhile the European Commission has recently published proposals for a 3rd EU Money Laundering Directive aimed at streamlining the measures in the 1st and 2nd Directives. ICAI, with CCAB-I, has called on Government to use this as an opportunity to address problems arising from the implementation of the 2nd Directive. Niall Walsh says: “In particular, we have stressed the need for a review of the manner in which the requirements of the 2nd Directive have been implemented which has resulted in a proliferation of smaller and trivial offences falling within the scope of the anti-money laundering regime. We have also drawn attention to proposals in the 3rd Directive which compound the existing advantage conferred on unqualified, unregulated and unaccountable accountants by proposals to impose additional regulatory obligations on professional bodies and their members”. Aidan Lambe adds, “While obviously we don’t condone any offences -whether they are considered trivial or otherwise - there is an issue around the practicality of having to report potentially multitudes of minor offences and a risk that the volume of reports with little or no intelligence value will clog the system with serious consequences.” So the ICAI is also seeking to agree with the Garda Siochana and the Revenue Commissioners “an effective and reasonable method for reporting suspected money laundering offences that recognises that many of the reports made are likely to be trivial in nature and of limited intelligence value”. The transposition of the 3rd Directive, when finalised, into Irish legislation, will provide the ICAI with an opportunity to push for further modifications to the anti-money laundering regime to provide clarity in the law and achieve a sensible and proportionate operation of money laundering obligations.

Northern Ireland The ICAI’s activities with regard to the UK anti-money laundering regime have been undertaken in conjunction with the Institute of Chartered Accountants in England & Wales, the Institute of Chartered Accountants of Scotland, and the other CCAB members in the UK. Of particular concern in the UK have been the differences in treatment in the anti-money laundering regulations between lawyers and others, especially accountants and tax advisers, when providing comparable services. At present, lawyers enjoy legal privilege in these circumstances. The Home Office has recently published proposals aimed at addressing this anomaly. These are being studied by the ICAI. Meanwhile, the Auditing Practices Board (APB) has issued interim guidance for auditors in the UK in the form of a Practice Note which focuses on the impact of the anti-money laundering legislation on auditors’ responsibilities when auditing and reporting on financial statements. but does not provide general guidance on the legislation.

Tables excluded from web edition.

Accountancy Ireland Vol 36 No 5 October 2004.

Dear Sir, May I know the CCAB-I webpage address? TQ