AML Checks for Accountants and Auditors – Best Practice Guide

Background of AML Checks for Accountants and Auditors

Accountants and auditors are key players in the financial system. As such, they play an important role in ensuring that services are not used for criminal purposes.

However, with this trust comes great responsibility, as you are one of the main targets for money laundering criminals. Money laundering is the processing of criminal proceeds to disguise their illegal origin and make them appear legitimate.

To protect yourself, you need to make sure your anti-money laundering (AML) procedures are watertight. Accountants and auditors around the world need to check their client base against AML checks to take a risk-based approach, comply with the law, and protect your reputation.

Failure to comply with AML regulations can have major consequences. These can be fines but also up to court proceedings or even jail time.

It is seen time and time again that these penalties are imposed. The main reason is that accountants and auditors have difficulties in implementing an AML process. For this reason, in this AML Checks for Accountants Best Practice blog, we explain how you can easily and efficiently prevent money laundering and terrorist financing and comply with AML laws.

Why are AML Checks for Accountants and Auditors needed?

As explained in the introduction, accountants and auditors are one of the main targets for money laundering and other criminal activities. Therefore, it is relevant that they protect themselves. But beyond that, there is another important reason: AML regulations.

AML Checks for Accountants and Auditors are necessary because you are required by regulations, e.g. by the FAFT. If you are an accountant, auditor or other financial services provider, money laundering regulations require you to know your clients before you act for them. If you provide services to clients, you are required by law to keep anti-money laundering records.

The services offered by lawyers and accountants, which may be misused in ML operations, include the following:

• Establishment of companies or other complex legal arrangements (like trusts), as such services may conceal the link between the proceeds of the crimes and the criminals
• Buying and selling of real estates, as the transfer of the real estate ownership is used to cover the illicit funds transfer (layering phase of ML) or the final investment of the proceeds passed through laundering operations (integration phase)
• Execution of financial operations on behalf of customers, like cash deposit or withdrawal, foreign currency exchange operations, sale and purchase of shares, sending and receiving international money transfers
• Filing of fictitious lawsuits to obtain a judgment to legitimize the funds

What are signs of money laundering for accountants and auditors?

There are three important signs accountants should look for when trying to prevent money laundering. If these red flags are detected, it is a sign that it indicates suspicious activity such as money laundering.

These include:

• Strange behavior of a long-time customer or client or making atypical requests.
• A client’s or customer’s request for financial arrangements that do not make economic sense
• Multiple requests from a client or customer for services that do not fall within your scope of responsibility

What are typical mistakes made by accountants and auditors in AML measures?

Accountants do not integrate AML controls into ongoing client work.

Think about your clients and ask yourself: are you really sure that you are not involved in any money laundering activities of a client?

After a client has been screened at the beginning of the partnership to see if it should be included, often no further action is taken. It is often forgotten that risk assessments are not just about the initial reviews of a customer, but also have implications for your ongoing work with them.

It could be that criminal activity has commenced during the time you are already in a business relationship. That is why it is important to record checks regularly even while in a business relationship.

Lack of ongoing monitoring

For many accountants, maintaining risk assessments is one of the main problems.

Ongoing monitoring falls into two categories:
A general annual review of the assumptions you have made about a client as part of a risk assessment.
Monitoring specific events, such as a change in the way they deliver your services, requires a new assessment of how this will impact your AML process with the client.

False trust

The guidelines for being classified as a high-risk customer may not be clear-cut. For example, an obvious high-risk customer might be a political figure. However, when you dig deeper, many higher-risk customers are more difficult to identify.

Take the example of a family friend who works at a cash-intensive company. You feel like you know him; you may have even gone to school with him. But while you can vouch for his identity, you need to treat his business as objectively and fairly as you would a stranger in a cash-intensive business.

Relevance of AML is sometimes underestimated

The AML Checks for Accountants and Auditors are a necessary evil for many. They think that they do not benefit from it and that it is only a necessary evil.

But the risk of not doing AML checks correctly far outweighs the time you have to spend on them. So now more than ever, it’s time to get your AML exams right.

How to conduct AML Checks for Accountants and Auditors?

As an accountant or auditor, it is important to perform proper due diligence and KYC. This includes various activities, which we have compiled below.

PEP Screening

PEP (Politically exposed Person) is not in all jurisdictions defined in the same way. But in general, Politically exposed Persons (PEPs) are persons who hold or have held an important public function. This function may, for example, give them influence over the use of taxpayer funds or the awarding of contracts by state-owned enterprises. As such, they are considered by the Financial Action Task Force to be a category of individuals more vulnerable to bribery, corruption, and money laundering than most.

Sanction Screening

Within the sanction screening, you can check for targeted financial sanctions (TFS). Individual countries and multinational organizations (e.g., the EU and the United Nations) impose sanctions to pressure other countries or organizations to change their behavior. Sanctions can be directed against individuals, specific companies, or entire nations.

There are 2 main types of financial sanctions: Asset freezing and the prohibition to offer funds and services.

Risk Assessments

The aim of a client risk assessments is to identify and assess the money laundering (ML) and/or terror financial (TF) risks identified at individual client level.

Therefore, the Risk Based Approach is important to implement in your organization. As a core principle of AML compliance the so called risk-based approach (RBA) refers to adjusting the level and type of compliance work done (frequency, intensity and/or amount), to the risks present.

How does CheckAML help with AML Checks for Accountants and Auditors?

DX Compliance is an AML and Compliance firm helping our clients identify, prevent and report financial crime. DX Compliance help Banks, FinTech’s and Payments Providers to continually monitor their risk and detect the threat of money laundering to ensure compliance and reduce fines.

CheckAML is the most efficient and cost-effective way of carrying out money laundering checks. We offer the only instant AML solution with full PEP & sanctions screening, ongoing monitoring and customer risk assessment worldwide. This helps to ensure Client Due Diligence for legal practices.

Our data and coverage is global, real-time and reliable, all your checks are automatically saved, for audits and regulatory visits. So everything you need we’ve got you covered.

Start your journey today and use CheckAML to screen your clients against global databases on an ongoing basis. To setup your account it takes less than 5 minutes. To learn more we also recommend to speak to our regional Sales Team and ask for a Demo.

Why do Accountants and Auditors choose CheckAML?

Auditors and Accountants choose CheckAML because of 4 important points.

• Easy to use
• Cost-Effective
• Efficiency
• Beeing Compliant 

Summary

Auditors and Accountants worldwide need to screen their customer base for AML Checks on an ongoing basis. With the DX CheckAML Platform this is easy, efficient, and cost-effective