Last week we looked at clients that might present a higher ML risk to the accountancy sector generally. This week we are continuing our series of blogs by focusing more on the potential characteristics of new clients that may present a higher money laundering risk.
One of the most reliable sources to help identify such risk, especially in the case of new clients is the Accountancy AML Supervisors Group Risk Outlook (April 2022 edition) which outlines some circumstances where there might be higher risk of money laundering or terrorist financing in the accountancy sector.
The report states ‘firms will need to identify the type of clients that they serve, considering the risks posed by these clients and identifying whether they present any of the following risks and associated red flag indicators. The presence of one or more red flag indicators may suggest a high risk of money laundering or terrorist financing (MLTF). Red flags are not exclusive to the risk areas identified here’. The bold highlights are our own.
|
Risk |
Red-Flag Indicators |
Why? |
| New clients outside of your normal client base | · new clients carrying out one-off transactions
· new clients based in locations significantly different from your normal client base · new clients in sectors significantly different from your normal client base |
· You should fully understand why an unusual client has approached you rather than using a firm of accountants that is closer geographically or a firm that advertises themselves as a specialist in a particular field
· A client may be higher risk if there is no logical rationale. |
| New clients – professional advisors | · client has changed professional advisors a number of times in a short space of time without legitimate reasons
· another professional advisor refused to provide the service to the client without legitimate reasons · the customer is prepared to pay substantially higher fees than usual without legitimate reasons · the client’s previous professional advisor was not a comparably sized firm |
· You should also be wary of why a client has changed professional advisors and seek to understand why this has happened.
· This may indicate a difference of opinion or a breakdown in the client-accountant relationship, which could be a red flag indicator that the accountant had concerns about something that the client doesn’t want to address · Clients concerned about the impact of sanctions or subject to sanctions may start to change their behaviours and consider changing their professional advisors · Larger professional advisors with sophisticated intelligence gathering systems may be concerned about existing clients and disengage. |
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
- Our latest CPD Webinar on The Main Changes in Irish GAAP (recorded July 2024)
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
