Our last blog for 2024 looked at new clients that might present a higher ML risk to the accountancy sector arising from particular characteristics of those clients.
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 (updated July 2024) which outlines some circumstances where there might be higher risk of money laundering or terrorist financing in the accountancy sector.
The report specifically addresses the AML risks that may arise from Politically Exposed Persons or PEPs.
A PEP is defined in Section 37 of the Criminal Justice (Money Laundering & Terrorist Financing) Acts 2010 to 2021 as:
- a head of state, head of government, government minister or deputy or assistant government minister;
- a member of a parliament or of a similar legislative body;
- a member of the governing body of a political party;
- a member of a supreme court, constitutional court or other high level judicial body whose decisions, other than in exceptional circumstances, are not subject to further appeal;
- a member of a court of auditors or of the board of a central bank;
- an ambassador, charge d’affairs or high-ranking officer in the armed forces; or
- a director, deputy director or member of the board of, or person performing the equivalent function in relation to, an international organisation. See below Prominent Public Functions.
Typically accountancy firms will continue to treat natural persons as PEPs for up to one year after they cease to hold that office, but also to continue to apply due diligence measures to a PEP for as long as is reasonably required to take into account the continuing risk posed by that person and until such time as that person is deemed to pose no further risk specific to politically exposed persons.
The effect of treating someone as a PEP is that they must be subject to enhanced due diligence i.e. applying enhanced levels of customer due diligence (CDD) to that particular client i.e. increasing the amount of information and documentation gathered about that client, based on judgements made by the MLRO and their support personnel, guided by the circumstances of that PEP and the potential a greater risk of money laundering that may arise as a result.
Since January 2020, all EU jurisdictions are required to publish a list describing those positions that are called ‘prominent public functions’ and which would bring the holders of such positions within the definition of a PEP in their country.
The list of those Prominent Public Functions in Ireland was published in by the Department of Justice in 2023 under section 37(12) of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended) clarifying those functions in the State that may be considered to be prominent public functions for the purposes of the Act.
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.
